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What could be expected from banks in upcoming Q2FY25 results

ICICIdirect Research 04 Oct 2024 DISCLAIMER

Banks expected to deliver mixed performance in Q2FY25 with pressure on margins to continue amid challenge on liabilities front, however, moderation in opex could offset the impact keeping return ratio steady.

While advances growth is expected to moderate at 13-14% YoY, led by slowdown in unsecured segment and NBFCs (owing to higher risk weight announced by RBI), deposits accretion is seen lagging behind at ~11.5% YoY. Continued competition in liabilities and accretion through term deposits is seen to impart pressure on margins to the extent of 5-15 bps in Q2FY25.

While overall slippages are expected to remain low, exposure to MFI and unsecured segment remains a concern. We anticipate a variation in credit cost based on composition of loan mix.

Anticipated cut in interest rates and continued competition on deposits is seen to offset treasury gains (owing to ~25 bps decline in g-sec yields). PSU banks, seems to be relatively well placed given comfortable CD ratio when compared to private peers along with sustained low cost deposit franchise.

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