Analysts Expect Indian Banks To Report 13-14% Net Profit Growth In Q4FY24

Indian banks are projected to witness a 13-14 per cent growth in net profit for the fourth quarter of 2023-24 compared to the same period last year, as indicated by independent analysts and brokerage firms. This growth is attributed to stable asset quality during the reporting quarter, despite some banks facing margin pressures due to higher funding costs.

Emkay Global Financial Services forecasts a better net profit growth of 15 per cent year-on-year for Public Sector Banks (PSBs), compared to 6 per cent for Private Banks (PVBs).

However, several lenders are expected to experience a compression in net interest margins (NIMs) due to rising funding costs amid heightened competition for deposits. Motilal Oswal Financial Services anticipates a 7-11 basis points moderation in NIMs for ICICI Bank, Axis Bank and Kotak Mahindra Bank, while NIMs for HDFC Bank, State Bank of India and Union Bank of India are expected to remain flat.

Deposit growth has outpaced credit growth according to provisional data from banks, indicating robust deposit mobilisation efforts. However, ratings agency ICRA predicts a moderation in credit growth for the fiscal year 2024-25, particularly in retail and non-banking financial company (NBFC) segments.

The narrowing gap between credit and deposit growth is a notable trend, attributed to aggressive competition for deposits and competitive term deposit rates offered by banks.

Asset quality has shown signs of improvement, with banks reporting lower deterioration. ICRA expects banks to report gross non-performing asset (GNPA) ratios of around 2.1 to 2.5 per cent and net non-performing asset (NNPA) ratios of 0.5 to 0.6 per cent by March 2025.

Treasury gains are expected to contribute positively to banks' earnings in the fourth quarter of 2023-24, supported by a moderation in government bond yields and a robust capital market.

Overall, while Indian banks anticipate healthy profitability and improved asset quality, they remain vigilant about margin pressures and the evolving credit landscape in the upcoming fiscal year.