Banks: Sector Credit Trends - Slowdown, more in store - HDFC Securities

After the surprising uptick seen in Jan-20, YoY non-food credit growth slowed to 7.3%, and MoM growth slowed to just 16bps. Agri credit growth showed slowing trends at 5.8%. Growth in industry credit slowed to just 70bps, dragging overall credit growth. After accelerating slightly in Jan-20, service credit growth slowed again to 6.9% (this segment has seen the most pronounced slowdown, as it grew at 23.7% YoY in Feb-19). Personal loan growth remained resilient at 17% YoY.

Mar-20 may see materially slower growth. Select management commentary and our understanding of the sector suggest that a significant proportion of disbursals occur towards the end of the qtr. Virus related disruptions will impact this. Further, the dip in growth is likely to be broad-based. Personal loan growth, which has contributed to much of the growth seen over FY19 and FY20 is likely to slow considerably.

- Within industrial credit, large industries (83% of industrial credit) dragged overall growth, growing just 70bps YoY (vs. 2.8% in Jan-20). Several sectors such as gems and jewellery (-16.8% YoY), all engineering (-4.8%), metals and metal products (-10%) and textiles (-6.6%) saw persistent de-growth. Within infra credit, telecom saw a spurt in growth (+54.3/3.7% YoY/MoM) while power (-2.8% YoY) and roads (-1.6% YoY) saw de-growth

- Within services, wholesale trade credit growth (13.6% YoY vs. 8.6% YoY in Jan-20) picked up while retail trade credit growth slumped (1.2% YoY vs. 1.7% in Jan-20). YoY credit growth to NBFCs slowed (22.3% YoY vs. 32.2% YoY in Jan-20 and 47.5% YoY in Feb-19), with MoM de-growth (-4.5%). Credit growth to the CRE segment was resilient at 15.1%

- Resilience in personal loan (28.4% of total credit) growth was visible across sub-segments (credit cards +33%, home loans +17.1% and other personal loans +20.6%). Interestingly, auto loan growth has shown accelerating trends, growing at 10.3% YoY (vs. 9.8% YoY in Jan-20 and 5.0% in Oct-19)

Source : Equity Bulls

Keywords