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Jul 12, 2012, 08.23 AM IST
Led by state-run banks which are set to report increased strains on asset quality, the banking sector is set to see profits decline by 11% in Q1 sequentially but a 43% spike in the same on an annualised basis, says a StanChart Securities report.
The state-run banks will see increased strains on their asset quality and more loan recasts pulling down their first quarter profit by 14 percent quarter on quarter (QoQ), though there will a full 53% spike in post-tax profit on an annualised basis, says the report.
With a comparatively better show by the private sector banks, the report says overall earnings for banks will see a likely decline of 11% quarter on quarter (QoQ) but an annualised growth of 43%.
The report further says though private sector banks remain better placed in terms of overall asset quality, they too will see stress on their assets with the overall profit declining by 5% QoQ and a growth of 30% year on year (YoY).
"We expect net profit for state banks to grow 53% year-on-year (primarily due to the low base effect for SBI) and decline 14% quarter on quarter in the first quarter of the fiscal.
"We expect net profit for private banks to grow 30% YoY and decline 5% QoQ. Overall earnings for banks will likely grow 43% YoY and decline 11% QoQ," the report titled 'India Financial-Q1FY13-Stress loans in focus again' prepared by Mahrukh Adajania and Rounak Agarwal of StanChart Securities said here today.
The report attributes poor number to flat loan growth, sharp growth in overseas loans due to rupee fall, high trading gains and/or write-back of investment depreciation due to volatility in G-secs and corporate bond yields, pressure on core fee income due to weak corporate activity, lower quarterly net interest margins due to high cost of deposits but no material dip and lower tax rates.
On the asset quality side, the report says, "the asset quality will remain mixed. Private banks will likely continue to show stable slippages and restructuring but the state-run banks will be a mixed bag."
Tags: banks, asset quality, Punjab National Bank, Bank of Baroda, Allahabad Bank, Bank of India, Axis Bank, HDFC Bank
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