Expect no suprise from banks' Q3 earnings growth

Moneycontrol Bureau

Banks are unlikely to spring any surprise, be it positive or negative in their third quarter (October-December) earnings in 2012-13. Private sector lenders continue to be preferred over their public sector peers. While asset quality concerns may have ebbed for state-owned banks, analysts do not expect any reduction in provisions. Higher provisions will keep profit margins under pressure, said analysts tracking banks.

"Sequentially, net interest margin should be positive as deposit rates have come down," Vaibhav Agrawal, vice president - research, Angel Broking told moneycontrol.com.

"Banks are not bearing any high cost of deposits. Besides SBI, no lender has yet reduced the base rate. This makes a case for better net interest margin. However, provisions level for PSU banks are likely to remain high on account of wage revision and increased rate of restructuring provisions to 2.75%," he said.

Analysts are expecting earnings growth in the range of 15-20% year-on-year on an average. HDFC Bank, ICICI Bank are the top two preferred bets while some expect a marginal contraction in SBI's net interest margin (NIM).

According to Antique Stock Broking, the quality of earnings will continue to remain healthier for private sector banks with lower level of slippages and restructuring, PSU banks are likely to witness treasury profits.

However, strong recoveries are expected from select state-owned banks. This would lead to lower slippages even though restructured assets may continue to pile up. Mid or small size banks may disappoint the market with the rising stock of restructured assets.

"Slippages for PSBs are likely to throw divergent trends with surge on back of economic improvement. With cut in lending rates coupled with improvement in macro conditions, we expect stress to reduce over the medium term. NIMs will continue to be stable in a declining interest rate cycle as pricing discipline followed by industry players is likely to restrict the slide," said a report by Edelweiss brokerage.

saikat.das@network18online.com