Banks: Slower loan growth a worry

● Asset quality concerns ease

WE EXPECT ANOTHER muted quarter for banks due to slower loan growth and a steady rise in loan-loss provisions. We are less worried about asset-quality metrics, except for lenders that have exposure to microfinance, where we see significantly higher credit costs. Non-banks under our coverage are expected to exhibit subdued loan growth, while we maintain a mixed outlook on asset quality despite stable collection trends.

Banks: A weak print ahead, but asset quality less worrisome Banks are poised for another quarter of muted earnings growth in Q3FY25. Provisional data from various banks indicates loan growth at 11-12% y-o-y, with HDFC Bank recording the slowest growth among peers. Concerns over the gap between deposit and loan growth have largely subsided, as banks have moderated their growth pace in response to subdued economic activity and tighter lending policies, particularly in segments like NBFCs and unsecured loans.