EUR 120.00 For Business Accounts Only

MOSL: FINANCIALS-Business growth healthy; Credit/deposit growth accelerates to 14.6%/9.7%

Financials: Business growth healthy; Credit/deposit growth accelerates to 14.6%/9.7%

 

• Trending well above 10% since Apr’18, systemic loan growth appears to be on a recovery course. Loan growth for the fortnight ended 18th Jan’19 stood at 14.6% YoY (v/s 14.5% for the last fortnight). The outstanding credit base has now reached INR93.3t. We expect loan growth to remain steady, led by continued strength in the retail segment, portfolio buyouts by banks, slowdown in NBFCs due to liquidity tightening, and the government’s recent capital infusion in PSU banks to bring them out of PCA. Moreover, with an improvement in capacity utilization in the system, the capex cycle is likely to recover gradually, further supporting credit growth.
• Deposit growth for the fortnight stood at 9.7% (v/s 9.9% for the last fortnight), leading to a decline in the outstanding deposit base to INR119.9t (v/s INR120.3t in the last fortnight). System CD ratio picked up further to 77.9% (26bp higher than the last fortnight), while the investment-to-deposit ratio dipped to 28.1% (9bp lower than the last fortnight).

Retail and services – key engines for growth

• The retail (+17% YoY) and services (+23% YoY) sectors remain the key drivers of loan growth. Industrial/agriculture growth, too, has picked up to 4.4%/8.4% YoY (up from 1.0%/5.9% in Apr’18).The share of retail in total systemic credit, thus, has increased to 26% from 19% four years ago. Retail traction for banks was driven by strong growth in credit cards (+32% YoY), housing loans (+17% YoY) and personal loans (+17% YoY). Further, the banks like ICICI Bank (INR68.5b), SBI and Union Bank have done portfolio buyouts from NBFCs, which has also contributed to the growth momentum.