Expect banks NIM to remain stable in Q4: Kotak Securities

Kotak Securities has come with its March`13 quarterly earning estimates for banking & NBFCS sector. The research firm expects fresh slippages to remain stable QoQ with positive bias for banks under their coverage.

Credit growth saw moderation; however, deposit mobilization continued to lag the overall credit growth, leading to rise in the C/D ratio- The credit growth has moderated marginally to 15.5 percent YoY (as on March 15, 2013) as compared to number reported during three previous fortnights, when it was hovering at 16 percent plus mark. We expect loan growth to come at ~15 percent for FY13, marginally lower than RBI's revised credit growth projection of 16 percent on back of subdued credit off-take on corporate segments. Deposit mobilization continued to lag the overall credit growth - 13.8 percent YoY (as on March 15, 2013) which has led to rise in the C/D ratio to 77.8 percent at the end of March 15, 2013, as compared to 75-76 percent seen during previous two quarters.

Outlook:

• During Q4FY13, net income for Banks under our coverage is expected to decline 1.1 percent YoY - private banks are likely to grow faster at 22.7 percent, while PSU banks are likely to report subdued performance (decline of 13.4 percent YoY) NBFCs are expected to report healthy earnings (20.1 percent YoY) on back of healthy core earnings and stable credit costs.
• Credit growth continued to moderate to (15.5 percent YoY as on March 15, 2013) while deposit mobilization continued to lag the overall credit growth - 13.8 percent YoY (as on March 15, 2013) which has led to rise in the C/D ratio.
• Expect NIM to remain stable QoQ with negative bias. We expect strong treasury profit during Q4FY13 as yield curve movement was volatile during the quarter. However, we are forecasting subdued core fee income on back of muted loan growth.
• We expect fresh slippages to remain stable QoQ with positive bias for banks under our coverage. However, addition to restructured portfolio is likely to be lumpy with one large account from wind power segment is likely to be reported during Q4FY13. Hence, banks having exposure to this particular account are likely to report higher provisions. We would be closely watching the revised restructured portfolio as banks would start reporting under new guidelines from this quarter.
• Top Picks: ICICI bank, HDFC Bank and IDFC.

Company	Net Interest Income (Rs mn)					PAT (Rs mn)
	Q4 FY13	Q3 FY13	QoQ (%)	Q4 FY12	YoY (%)	Q4 FY13	Q3 FY13	QoQ (%)	Q4 FY12	YoY (%)
Allahabad Bank	13,771	13,302	3.5	12,884	6.9	3,369	3,108	8.4	4,002	-15.8
Andhra Bank	9,940	9,714	2.3	9,139	8.8	3,077	2,571	19.7	3,397	-9.4
Axis Bank	26,282	24,948	5.3	21,461	22.5	14,561	13,472	8.1	12,773	14
BOB	29,912	28,409	5.3	27,974	6.9	11,774	10,116	16.4	15,182	-22.4
HDFC Bank	41,294	37,989	8.7	33,883	21.9	18,913	18,591	1.7	14,531	30.2
ICICI Bank	38,005	34,990	8.6	31,048	22.4	23,296	22,502	3.5	19,018	22.5
Indian Bank	12,052	11,434	5.4	10,826	11.3	3,328	3,306	0.7	3,454	-3.7
IOB	14,267	13,816	3.3	13,406	6.4	2,410	1,165	106.9	5,288	-54.4
J&K Bank	6,479	5,942	9	5,161	25.5	2,631	2,894	-9.1	2,081	26.4
PNB	38,798	37,333	3.9	33,100	17.2	13,604	13,056	4.2	14,241	-4.5
SBI	113,004	111,545	1.3	117,038	-3.4	37,789	33,961	11.3	40,503	-6.7
Union Bank	19,208	18,915	1.6	18,766	2.4	5,863	3,024	93.9	7,732	-24.2
HDFC	18,900	14,757	28.1	16,808	12.4	15,500	11,401	36	13,261	16.9
IDFC	6,750	6,560	2.9	5,970	13.1	4,580	4,520	1.3	3,319	38
M&M Financial	6,330	5,612	12.8	5,089	24.4	2,818	2,002	40.7	2,277	23.8
Shriram Transport	9,240	8,947	3.3	8,056	14.7	3,459	3,460	0	3,081	12.3

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