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MOSL: Morning India (06/April/18): 1. Financials 4QFY18 Preview (A. Banks, B. NBFCs); 2. EcoScope (RBI keeps policy rates on hold); 3. NBFC; 4. Power Grid

MOrning India (06/April/18): 1. Financials 4QFY18 Preview (A. Banks, B. NBFCs); 2. EcoScope (RBI keeps policy rates on hold); 3. NBFC; 4. Power Grid

 

Today’s top research theme

Financials - Bank Preview 4QFY18: Higher provisioning to remain a drag on earnings

• We expect NII to be flattish QoQ (rising cost of funds combined with interest reversals) for state-owned banks. For private banks, we expect NII to grow 11% YoY (and 4% QoQ); mid-sized private banks are expected to report ~23% YoY growth.
• An increase in CD-ratio for most coverage banks as well as for the system over the last two quarters indicates that liquidity in the system has slowed from the highs witnessed post demonetization.
• Many banks have raised deposit rates as an attempt to attract more deposits, indicating a possible start of reversal of cost of funds, which has been benign so far. However, most banks have also increased MCLR in February/March; so, NIM is not likely to be impacted meaningfully.

Piping hot news

RBI keeps repo rate unchanged at 6%, cuts inflation forecast

• The Reserve Bank of India (RBI) kept its policy rates on hold on Thursday and retained its “neutral” stance but lowered its inflation call, reducing the odds of a near-term rate hike and spurring a rally in stocks and bonds. The RBI kept its policy repo rate unchanged at 6% for the fourth straight meeting as unanimously expected by 61 respondents in a Reuters poll. That level is the lowest since November 2010. It also kept the reverse repo rate unchanged at 5.75%.