Indian Banks Forecasted to Witness 13-14% Net Profit Growth in Q4FY24, Analysts Predict

Indian Banks Forecasted to Witness 13-14% Net Profit Growth in Q4FY24, Analysts Predict

10 April 2024 – Analysts and brokerage firms anticipate Indian banks to exhibit a 13-14% surge in net profit during the fourth quarter of the fiscal year 2023-24 compared to the same period the previous year. This growth projection is attributed to stable asset quality, despite potential challenges such as margin pressures due to increased funding costs.

Public Sector Banks (PSBs) are expected to outperform Private Banks (PVBs) in terms of net profit growth, with a forecast of 15% growth for PSBs compared to 6% for PVBs, as stated in a report by Emkay Global Financial Services. However, rising funding costs may lead to a compression in net interest margins (NIMs) for several lenders, including ICICI Bank, Axis Bank, and Kotak Mahindra Bank, with an anticipated moderation of 7-11 basis points (bps) according to Motilal Oswal Financial Services.

Deposit growth has been robust across various banks, surpassing credit growth in several cases. Ratings agency ICRA predicts a moderation in credit growth in 2024-25, signaling potential challenges for lenders. However, asset quality is expected to improve in Q4, with a projected gross non-performing asset (GNPA) of around 2.1 to 2.5 percent and net non-performing asset (NNPA) of 0.5 to 0.6 percent by March FY25.

Furthermore, banks are anticipated to report healthy treasury gains in Q4FY24 due to easing government bond yields and a buoyant capital market. Kotak Mahindra Bank’s earnings, for instance, could increase by 10% on a quarterly basis, primarily driven by higher treasury gains. The moderation in government bond yields, coupled with increased demand from domestic and overseas investors, has contributed to the positive outlook for treasury income.