Money & Banking

Q4 results: Banks are likely to report strong growth, improved asset quality

Surabhi | | Updated on: Apr 12, 2022

Not much impact of third wave of the pandemic

Mumbai, April 12 Shrugging off the Covid-19 pandemic related pains, banks are likely to have registered healthy growth in the fourth quarter of the fiscal, aided by robust credit offtake and improvement in asset quality.

“Overall earnings are likely to be healthy, supported by a pick-up in loan growth, steady net interest margins, and asset quality improvement,” said Axis Securities.

Commentary on the NIM outlook would be a key monitorable in light of an expected inch-up in key policy rates and competition intensifying as they are likely to put pressure on passing of higher yields, it further said.

Private sector banks led by HDFC Bank are set to announce their results for the fourth quarter and the full financial year 2021-22, from later this week.

HDFC Bank’s results are scheduled on April 16, ICICI Bank’s on April 23 and of Axis Bank on April 28.  

Public sector banks are expected to announce their financial performance later in the month.

According to Motilal Oswal, private banks are estimated to report pre provision operating profit (PPoP) growth of about 10 per cent year-on-year and 6 per cent quarter-on-quarter (Q-o-Q) and net profit growth of about 38 per cent year-on-year and 2 per cent (Q-o-Q).

“Earnings are likely to remain strong, led by healthy business growth/fee income and a sustained reduction in credit cost,” it said.

Public sector banks are likely to deliver net interest income and PPoP growth of 23 per cent and five per cent respectively on a year-on-year basis while profit after tax could grow at a robust 80 per cent in the fourth quarter, the brokerage said.

Muted impact of third wave:

Analysts also noted that the third wave did not have much of an impact on collections and loan demand.

“March quarter being seasonally strong in terms of disbursements and impact of third wave of pandemic being minimal, we believe after two years we would witness full-fledged business activity in the fourth quarter of 2021-22,” said ICICI Securities.

Operational numbers should also show improvement with various parameters like asset quality, margins, witnessing improvement. Advances growth is expected to be driven by retail and MSME segment as they have been in the past few quarters, it further said. 

Most banks have reported strong growth in disbursements in their provisional figures on advances and deposits ahead of their results.

Yes Securities also said that fresh slippages in the fourth quarter of 2021-22 would generally be stable to lower on sequential basis for our coverage banks.

“Some incipient underlying stress may have formed due to the third wave of Covid-19 and due to the disruption caused by the Russia-Ukraine war. However, we think that the third wave was short-lived and its impact on asset quality should be minimal,” it said.

Published on April 12, 2022
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