Loan growth accelerates
According to Sharekhan, recent RBI credit growth data shows the number improved to 7% year-on-year (as of December 17, 2021), which is positive for the industry, especially for the big banks. However, deployment data indicates that business credit has yet to pick up, which has remained stable year-over-year.
“While the growth of credit to MSMEs has been mainly supported by the ECLGS program. We would be very attentive to management’s comments on the banks’ short-term growth prospects in our coverage. Retail credit is expected to experience strong growth in the quarter while continuing to grow in itself. this segment. Deposit growth is expected to be 8-10% with most banks like HDFC Bank, Federal Bank and Yes Bank reporting strong deposits, ”the brokerage said.
Asset quality will improve
For the third quarter of fiscal 22, Sharekhan expects asset quality to improve for most banks, driven by smaller slippages and better collection efficiency.
“With the economic recovery being uneven across sectors, the retail and SME segments could experience some improvement in insolvencies, while for businesses there would be no major slippages. We expect positive feedback from management on the future trend in asset quality. In addition, the restructured ledger is likely to hold at current levels, the behavior of which would influence the future trajectory of banks’ cost of credit. Overall, the cost of credit is expected to moderate during the quarter, ”the brokerage said.
5 bank stocks to buy according to Sharekhan
Bank stock prices corrected highs on concerns about growth, economic recovery and asset quality management.
“We believe that with the gradual recovery of systemic credit and the economic recovery, albeit uneven, it would bring back market participants’ interest in the sector, with larger players focusing more. Banks with better practices of underwriting and a better loan mix have everything to gain. We expect banks to renew their focus on credit growth in order to maintain profitability in the future. Asset quality is likely to improve over time. ‘future,’ the brokerage said.
Major purchases in the banking industry, according to the brokerage, include securities such as State Bank of India, ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank.
The above stock was chosen from Sharekhan’s brokerage report. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author and the brokerage are not responsible for any losses caused as a result of decisions based on the article. As of the date of the article, the author and his family do not possess the actions recommended in the above article.