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MOSL: FINANCIALS- Credit growth moderates, reflects economic slowdown; Growth moderates in consumption-linked segments; Deposit growth picking up

FINANCIALS: Credit growth moderates, reflects economic slowdown; Growth moderates in consumption-linked segments; Deposit growth picking up

 

• Systemic loan growth moderated to 11.6% YoY for the fortnight ended 16th Aug'19 (v/s 14.2% in Apr'19) with the outstanding credit base reaching INR96.8t. Loan growth of private banks moderated to 16% YoY (1% QoQ) during 1QFY20. The moderation in loan growth reflects the current slowdown in the economy and consumption-linked sectors. Auto loans, too, moderated and showed tepid growth of ~5% YoY (1% QoQ) as at Jul'19 due to the auto sector slowdown and increased caution towards lending to auto dealers. Further, some moderation was also witnessed in unsecured loans (-1% MoM), which had grown at a strong pace in recent years.
• Corporate loan growth continues to struggle as new names get added to the stressed pool. Therefore, banks were cautious towards lending to certain segments of the economy. Overall, growth in the industry segment came in at ~6% YoY while growth in the services segment moderated to ~15% YoY (v/s 23% last year).
• Overall, we believe large private banks like HDFCB, ICICIBC and AXSB will not only maintain healthy growth but will continue to grow above the systemic growth. Mega consolidation in PSBs could moderate loan growth in the near term, barring SBI and BOB.