Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

BFSI - Q2FY22 preview: Recovery mode on; growth to follow - ICICI Securities

Posted On: 2021-10-11 23:24:35 (Time Zone: IST)

Q2FY22 will be characterised by an uptick in disbursements and collections with recovery in business activities. Loan portfolio has witnessed gradual accretion all through Q2FY22 with signs of improvement in pockets. On a low base, banks have reported 4-6% QoQ loan growth and YoY growth momentum too has gained traction. With collections/recoveries improving MoM, we expect forward flows into delinquency buckets to be restricted. Unwinding of stress and upgrades into standard bucket will be higher for NBFCs compared to banks. Despite gradual moderation from Q1FY22 base, stress pool (including stage-2 and restructuring) will still be elevated. Credit cost will subside QoQ but normalisation seems a quarter to two away. Restructuring under OTR 2.0 will continue in Q2FY22 within the guided/anticipated range. With respect to corporate credit, recovery from Dewan Housing Finance and stress recognition for SREI will keep trend volatile across banks. We expect <10% YoY/flat QoQ growth in operating profit for financiers and earnings on low base are expected to grow at 24-25% YoY/QoQ.

  • Collection efficiency improving MoM; forward flow into delinquency buckets to be restricted: Post June'21, lenders have witnessed MoM improvement and normalisation of collection efficiency (CE). By Sep'21, in several product segments, CE was better than Mar'21 level and near to pre-covid average. We believe forward flow into delinquency bucket will be restricted in Q2FY22. With better recoveries and collections, there will be improvement in overall stress pool. We are anticipating incremental non-annualised slippages of 0.5-1.0% in Q2FY22, primarily flowing from retail and MSME segments. Corporate portfolio behaviour will be as resilient (except for SREI slippage offset by DHFL recovery). Unwinding of stress and upgrade to earlier bucket (stage 2 from stage-3) will be higher for NBFCs compared to banks.
  • Credit cost to subside; normalisation a quarter to two away: With front loading of provisions and creation of buffers in Q1FY22 as well as FY21, we believe credit cost will settle at level lower than Q1. However, normalisation to steady state credit cost is still couple of quarters away. We believe financiers would only partially utilise contingency buffer and will prefer more to carry it forward for future contingencies.
  • Lower slippages, liquidity release, CASA accretion to support NIM profile: Relatively lower slippages, shift in portfolio mix towards retail, some release of liquidity buffer and robust CASA accretion should support margin profile. We believe benefit of lower deposit cost is largely reflected and incremental NIMs can draw support from CD ratio expansion and utilisation of surplus liquidity.
  • Growth regaining momentum but gradually; corporate credit still drags: Bank credit data suggests gradual MoM accretion in credit pool with signs of improvement in pockets. Bank's home loan portfolio has stayed put since Mar'21, credit cards have sustained momentum, vehicle loan momentum has moderated due to supply side constraints, and large industry credit continues to drag. Most banks have disclosed 4-6% QoQ loan growth and on a low YoY base of Q2FY21, growth momentum has improved for most of them. Amongst players, HDFC Bank (up 4.4% QoQ), Bajaj Finance (up 7% QoQ) continue with relatively better traction, IndusInd (up 5.3%), YES (5.7% QoQ), AU (4% QoQ), Federal (3% QoQ) and IDFC FIRST Bank have gained momentum after modest growth in the past quarter and RBL lagged peers with flat QoQ advances.
  • HFCs/NBFCs: With restricted forward flow into delinquency bucket and incremental restructuring, we expect stage-3 pool in absolute term to moderate by ~5-10%. Despite gradual moderation, stress pool (including stage-2 and restructuring) will still be elevated. Credit cost will be driven by restructuring quantum, stress flow stress and write-offs. Credit cost may subside compared to Q1FY22.
Our preferences and recommendations:

Stress is being managed well by HDFC Bank, SBI, Axis Bank, and Federal Bank with growth too gaining traction thereby, improving visibility on earnings trajectory. We stay with them as our preferred picks. Amongst non-banks, we prefer HDFC, Chola, Repco.

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

UltraTech Cement - Revenue Inline, inflated cost dragged EBITDA - YES Securities

Craftsman Automation - Q2FY22 First Cut - YES Securities

Ultratech Cement - 2QFY22 Result Update - Elevated Costs Pressure Led To Earnings Miss - Reliance Securities

L&T Infotech - Q2FY22 Result highlights - YES Securities

UltraTech Cement - Margins to sustain despite cost escalations - ICICI Securities

Hatsun Agro Products - Strong results; stretched valuations - ICICI Securities

Larsen & Toubro Infotech - Consistently consistent! - ICICI Securities

Company Update - GTPL Hathway - ICICI Direct

Chemicals - Q2FY22 Results Preview Report - HDFC Securities

Consumer Durables - Q2FY22 Results Preview Report - HDFC Securities

HCL Technologies - Q2FY22 Result Update - YES Securities

Avenue Supermarts - Q2FY22 Result Update - YES Securities

Wipro - Q2FY22 Result Update - YES Securities

Mindtree - Q2FY22 Result Update - YES Securities

HDFC Bank - Q2FY22 Result Update - YES Securities

Avenue Supermarts - Recovery tracking well - ICICI Securities

Mahindra CIE Automotive - Strong performance amid supply chain issues - ICICI Securities

PNB Housing Finance - Preferential issue called off; overhang resurfaces - ICICI Securities

Q2FY22 Result Preview - Real Estate & Infrastructure - ICICI Direct

Q2FY22 Result Preview - Healthcare - ICICI Direct

Q2FY22 Result Preview - Chemicals - ICICI Direct

Gladiator Stocks - Vardhman Special Steel - ICICI Direct

Q2FY22 Result Update - HDFC Bank - ICICI Direct

Q2FY22 Result Update - Wipro Ltd - ICICI Direct

Q2FY22 Result Update - HCL Technologies - ICICI Direct

Q3CY21 Company Update - Mahindra CIE - ICICI Direct

Q2FY22 Result Update - MindTree Ltd - ICICI Direct

Q2FY22 Result Preview - Oil & Gas - ICICI Direct

Q2FY22 Result Update - Infosys - ICICI Direct

Consumer Durables - Fans - a compounding story but underrated - HDFC Securities

Cement - Strong demand; rising costs to hit margin - HDFC Securities

Maintain BUY on HCL Technologies - Deal wins to boost growth - HDFC Securities

Maintain BUY on Cyient - Improving growth vectors - HDFC Securities

Maintain BUY on Infosys - Growth engine revving up - HDFC Securities

Maintain ADD on Wipro - Continued growth momentum - HDFC Securities

Maintain ADD on Mindtree - Decade-high growth! - HDFC Securities

Peak in the headline wholesale inflation is behind us - WPI Sep'21 - Acuité Insights

Wipro - 2QFY22 Result Update - Continued Growth Outperformance; Raise TP to Rs760 - Reliance Research

Exchanges, Staffing and Internet - Q2FY22E Results Preview - Mixed bag; visibility improving - HDFC Securities

FMCG & Alco Bev - Q2FY22 Results Preview - Demand resilient; EBITDA to stay under pressure - HDFC Securities

Infosys - 2QFY22 Result Update - Superior Execution Deserves Multiple Rerating; Raise TP to Rs2,120 - Reliance Research

Mid-caps - Q2FY22 Results Preview - Healthy YoY Growth Across Segments - Reliance Research

Ramkrishna Forgings - 2QFY22 Result Update - Reliance Research

Expect CPI to be 5.5% for FY22 - Acuite Ratings

Industrials - Q2FY22 Results Preview - Strong execution pick-up - HDFC Securities

Real Estate - 2QFY22 Results Preview - Strong presales momentum - HDFC Securities

Sunteck Realty - All eyes on festive season - ICICI Securities

Prestige Estates Projects - Festive fervour kicks in - ICICI Securities

Company Update - Motherson Sumi Systems - ICICI Direct

Company Update - Indian Energy Exchange - ICICI Direct

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020