Microsec: BFSI Quarterly Performance Analysis Q1FY15 microsec.in/static/pdf/BFSI%20Quarterly%20Performance_Analysis_Q1FY15.pdf Performance of real economy drives the fortune of Indian Banking Industry. India’s poor economic growth rate coupled with high inflation which led to high cost of capital and adverse regulatory environment in some business such as Mining, Power, Infrastructure etc have badly affected the Indian Banks’ (specially PSBs) financial. Moreover, delayed in the execution of projects along with high cost of capital have dented the ability of Indian companies to repay their loans, which has been clearly reflected in the loan books of Indian Banks especially, PSBs. However, the Government’s persistent support, strong vigilance by the regulator (RBI) and the Banks’ diversified business portfolio continue to make Indian Banks resilient. Unlike last quarter (Q4FY14) wherein, the industry had reported an improvement in the asset quality, in this quarter, most of the listed Banks and all big Banks (including Private and Public) reported deterioration in their asset quality. As on 30 th June 2014, Gross Non-Performing Asset (GNPA) of 37 listed Indian Banks crossed over INR2.48 trillions or 3.73% of total advances. Out of which, GNPA of 21 listed Public Sector Banks stood at ~INR2.16 trillions or 4.72% of total advances as against ~INR2.09 trillions or 4.37% in fourth quarter of FY14, deteriorated by ~INR7909 crores or 35bps QoQ . Whereas, GNPA of 16 listed Private Sector Banks too deteriorated by 34bps or ~INR2919 crores to 2.39% or ~INR27060 crores as against 2.05% or ~INR24141 crores in the fourth quarter of FY14. Slowdown in the economy, lower restructuring and tepid advance growth were the reason for this abysmal numbers. However, to avoid this NPA problems and to enhance healthy business growth, the Indian Banks are rapidly expanding their wings in retail banking wherein, the demand is high and relatively secured. Since last 3 years, PSBs are suffering from asset quality problem, as a result, their profitability has been eroded and also their overall business growth has gone down. In this quarter (Q1FY15), despite lower provisioning, PSBs have reported ~3% YoY de-growth in their bottom line. Whereas, Private Banks reported a ~15% YoY growth in their bottom line, supported by lower provisioning and stable topline growth. Outlook Indian economy seems to be turn around as all indicators are favorable. Current Account Deficit (CAD) and Fiscal Deficit have shown some improvement which has helped in the INR appreciation and may continue to keep INR firm. As a result, Banks’ operating environment may get stable going forward. We believe that the new and stable Government may focus more on the stalled projects (in which the Banks have a significant exposures) and take initiative to revive the same. The Government may also keep focus on the investment front and may come out with the new business friendly policies, which will solve the issue of infrastructure bottlenecking and increase the capacity expansion which may fuel the economic growth and INR appreciation against major currencies. However, recently few PSBs are under the scanner of investigating agency on account of fixed deposits fraud which dented our confidence to invest on them for short term. We believe, the Banks which are better placed are likely to generate better business and returns. On the Monetary policy front, as per the RBI August 2014, Monetary Policy, bring down inflation at the projected level will be the priority. We believe, the monsoon which is below average may inch up the inflation figure in the coming months. Hence, we see, from CY15 onwards, the RBI may start cutting rates cautiously.
Posted on: Tue, 02 Sep 2014 09:32:26 +0000