Bank: Sector Credit Trends - Slows, Yet again - HDFC Securities

Mr. Krishnan ASV, Institutional Research Analyst, HDFC Securities.

Non-food credit growth hit a 41-month low of 5.6%, led by a broad-based slowdown in industrial and service credit and personal loan growth. However, individual pockets within the aforementioned segments and growth in agricultural credit showed signs of improving momentum. In the medium term, we expect credit growth at our coverage banks to recover, aided by improving economic conditions and we continue to model a credit growth of 6.3/12.2% in FY21/22-23E for banks within our coverage universe.

Industrial credit witnessed persistent de-growth at -1.3% in January. This trend was expectedly led by large industrial credit, which constitutes ~82% of industrial credit and de-grew 2.6% YoY (however, this segment registered a ~50bps MoM growth). Micro and small industries saw negligible growth at ~90bps YoY while growth in credit to medium industries continued to surge, reaching 19.1% YoY, (+3% MoM). We believe growth in credit to medium industries was aided by disbursals under the ECLGS. Within industrial credit, sectors such as infrastructure (led by telecom), metals and all engineering saw persistent YoY de-growth. Other segments such as textiles and gems and jewelry saw an improvement in their growth trajectory.

Service sector credit growth continued to slow, reaching 8.4% YoY in January 2021, after having risen to 9.5% in October 2020. Interestingly, within this segment, growth in credit to NBFCs spiked to 20.2% YoY, after having fallen to 7.8% YoY in November. Growth in credit to the CRE segment continued to slow, reaching 2.8% YoY. Overall trade credit growth improved to 15.7% YoY as wholesale trade credit growth remained strong at 25.7% YoY while retail trade credit growth rose to 7.3% YoY.

The personal loan segment saw growth slowing to 9.1% YoY, the lowest in the last ~10 years (after staging a recovery in growth to 10% YoY in November). This trend was broad-based with sluggish growth in home loans (+7.7% YoY, the lowest in the last ~10 years) and credit card debt (+ 5.0% YoY). Vehicle loan growth slowed slightly, reaching 7.1% YoY. This segment has been the most significantly impacted by COVID-19.

Agricultural credit growth accelerated further to 9.9% YoY, boosted by back-to-back surplus monsoon seasons.

Source : Equity Bulls

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