Private Banks to Outperform PSU Peers in Q1 PAT Growth, Says Motilal Oswal

Private banks are expected to outperform their PSU peers in the upcoming Q1 PAT show, despite macro pressures, according to analysts at Motilal Oswal. The brokerage firm estimates a 10% year-on-year growth in profit after tax (PAT) for private lenders, compared to 9% for PSU banks.

Private Banks Lead PSU Peers in Q1 PAT Growth

Provisional numbers already indicate a divergence in balance-sheet growth, with private banks expanding deposits by 14% YoY in the June quarter, outpacing PSU banks’ 11% growth. However, PSU banks have taken the lead in lending, with a 16.4% YoY expansion in loan books compared to 15.9% for private banks.

Key Drivers of Private Bank Growth

The growth of private banks is driven by their strong deposit growth, which has enabled them to maintain a healthy loan-deposit ratio. Additionally, their focus on retail lending has helped them to maintain a stable asset quality.

Market Impact and Details

• Private banks are expected to see a 10.4% YoY growth in net interest income (NII), with HDFC Bank leading the pack at 8.5% YoY.
• State-run lenders are expected to see a range-bound net interest margin (NIM) and modest fee income, with a boost from treasury gains due to easing bond yields.
• Sector credit growth stood at 17.7% YoY as of 15 June, with the bulk of incremental growth coming from gold loans, corporate credit, and NBFC lending.

Key Takeaways

• Private banks are expected to outperform PSU peers in Q1 PAT growth.
• PSU banks have taken the lead in lending, with a 16.4% YoY expansion in loan books.
• The growth of private banks is driven by their strong deposit growth and focus on retail lending.

FAQs

What is the expected growth rate of private banks in Q1 PAT?

Analysts at Motilal Oswal expect a 10% year-on-year growth in profit after tax (PAT) for private lenders.

What is the expected growth rate of PSU banks in Q1 PAT?

Analysts at Motilal Oswal expect a 9% year-on-year growth in profit after tax (PAT) for PSU banks.

What are the key drivers of private bank growth?

The growth of private banks is driven by their strong deposit growth and focus on retail lending.

Conclusion

Despite macro pressures, private banks are expected to outperform their PSU peers in the upcoming Q1 PAT show. The growth of private banks is driven by their strong deposit growth and focus on retail lending. As the sector enters the earnings season, investors will be closely watching the performance of individual banks, including State Bank of India, HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank. With the sector credit growth standing at 17.7% YoY, the stage is set for a strong Q1 earnings season.