In the current scenario where NBFCs are facing tight liquidity conditions, banks are expected to see much higher credit growth by gaining significant market share in the home loans, PVs, CVs and 2 wheeler portfolios.
The Reserve Bank of India (RBI) will on April 4 announce its first monetary policy decision of the new fiscal year 2019-2020.
The RBI's Monetary Policy Committee (MPC) was scheduled to meet from April 2 to April 4 to decide on key interest rates.
There are expectations that the regulator may cut repo rate by 0.25 percent (25 bps) to boost the economic activity. It had reduced the repo rate by 25 basis points in February after a gap of 18 months.
With more repo rate cuts in the pipeline, banks could see a near-term spike in NIMs due to reduced borrowing costs and lag in MCLR resets affecting yields. While the NIMs will return to normal in long run, reduced interest rates could have a positive impact on credit growth, which is already at 14.1% (as on 1st March 2019), said CSEC (Chola Securities) Research in its report.
Quarterly cut announced in SLR by MPC in January along with the recent tranche of capital infusion in February worth Rs 482 billion in PSU banks (cumulative INR 1.06 tn) and the first of its kind, rupee dollar swap in March (Rs 346 billion or USD 5 billion) has further enhanced the liquidity in the system, which could act as a catalyst to the credit growth, it said.
In the current scenario where NBFCs are facing tight liquidity conditions, banks are expected to see much higher credit growth by gaining significant market share in the home loans, PVs, CVs and 2 wheeler portfolios, report further added.
Following are the 3 buying ideas from the research house on the back of expected repo rate cut from RBI:
The bank current NIMs is at 3%. With lower fresh delinquencies and higher credit-deposit ratio, the management expects to see improvement in margin in 4QFY19 and in FY20. Profitability to further accrue from growth in high yielding unsecured loans segment, the asset quality of which has been held up well to date.
Technically, SBI breached short term resistance at Rs 320 and trending towards long term resistance at Rs 350. If price breaches this levels, we can expect Rs 400 in medium term. Short term support is seen at Rs 280.
The management expects loan book to grow at 30-35 percent till FY20E, with major chunk coming in from the credit segment. NIMs are expected to remain at current levels of 4.1%. The management also plans to add 25 new branches in 4QFY19 and 60-70 branches in FY20E to further aid in CASA accretion targeting a growth of 0.75-1% every year, till FY20 in CASA ratio (currently at 24.6%).
Technically, RBL Bank breached medium term resistance at Rs 650 and trending towards 161.8% Fibonacci extension at Rs 780. Short term support is seen at Rs 600.
The management has guided for a steady sell down of loans, worth Rs 40-60 billion, for funding loan growth going ahead. The company expects the PAT to grow at 15-16% YoY in FY19, with stable spreads at 3-3.25%. For FY20, the management has guided for an AUM growth of 20-25%, net income growth of 17-19%, and balance sheet growth of 10%.Technically, the stock breached short term resistance at Rs 850 and trending towards long term resistance at Rs 1,100. Short term support is seen at Rs 750.