MOSL: FINANCIALS-Business growth remains healthy; Growth environment becoming conducive for banks
FINANCIALS: Business growth remains healthy; Growth environment becoming conducive for banks
Systemic loan growth in the country has started to show initial signs of recovery; it is trending well above 10% since April 2018. Loan growth for the fortnight ended 28 September came in at 12.2% YoY. We note that this growth is glaringly concentrated in the hands of private banks—they have generally been witnessing strong credit opportunities– collectively reporting 21% credit growth for FY18. We expect loan growth to accelerate further in the coming months led by continued strength in retail segments, while receding competition from NBFCs and higher portfolio buyouts should further aid overall growth. Besides loan growth, banking system deposit growth is also showing an improving trend with the system witnessing INR2.29t of accretion in deposit base during the latest fortnight (seasonality due to quarter-end), though deposit growth stood modest at 7.6%. We believe the recent volatility in equity and debt markets could provide much needed impetus to the banking system deposit growth. Thus banks with higher proportion of low cost deposits (CASA + retail TD) would benefit as cost of funds for these banks would be relatively lower than the wholesale funded banks. We like ICICIBC, AXSB, SBIN and RBK within our coverage universe.
Business growth gaining traction; outlook turning favorable
Systemic credit growth for the fortnight ended 28 September 2018 stood at 12.2% YoY led by credit accretion of INR1.84t—we expect this trend to improve further, led by continued traction in retail and working capital loans. Capacity utilization levels in the system have also improved, and we expect a gradual recovery in the capex cycle, particularly after the resolution of the RBI’s two NCLT lists in FY19. Deposit accretion has also shown some recovery signs as the system witnessed INR3.6t of deposits over the past two months (INR2.29t in the latest fortnight).
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
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