Macquarie warns banks loan growth may slowdown, expects margin pressure
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While retail and SME segment remain key drivers in the medium-term, CASA remains a big challenge for all the banks
Shares of top banking names including State Bank of India (SBI), ICICI Bank, Axis Bank, HDFC Bank, and Kotak Mahindra Bank have surged up to 8 percent in the past one week
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Shares of top banking names including State Bank of India (SBI), ICICI Bank, Axis Bank, HDFC Bank, and Kotak Mahindra Bank have surged up to 8 percent in the past one week, as against 4 percent rise in the Bank Nifty index as market participants hopes increased for a stable government in the run-up to 2024 elections. However, analysts at Macquarie in its recent note cautioned that the banking system may witness slowdown in loan growth and see margin pressure in the medium-term.
“We expect growth to moderate in the unsecured and NBFC segment. While retail and SME segment remain key drivers in the medium-term, CASA remains a big challenge for all the banks. We expect credit costs to normalise over time but margin is expected to come down in FY25,” the brokerage firm said in its recent note.
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In the case of Axis Bank, Macquarie shared a ‘neutral’ rating, with a target price of Rs 980 per share. Axis Bank stock ended at Rs 1,118 in the previous trading session. “We expect profitability ratios to be maintained with the Reserve Bank of India’s new risk-weight rules. Though we foresee credit costs to normalise in the medium-term, the operating expenditures are expected to remain elevated,” the brokerage firm added.
For HDFC Bank, analysts at Macquarie shared an ‘outperform’ call, with a target price of Rs 2,110 per share. This is 29 percent upside from previous close of Rs 1,630. “We expect the bank to reach a target of 4 percent margin in 4 years. The management indicated that RBI action of risk-weight norms for unsecured loans was necessary due to high growth seen in NBFCs and certain banks. Net interest margins (NIMs) are expected to remain inelastic to interest rate shifts and asset quality is expected to be robust,” the brokerage firm added.
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Macquarie’s take on SBI, on the other hand, was an ‘outperform’ call with a target price of Rs 720 per share. “The pricing measures are yet to be evaluated for personal loans and NBFCs. The adjusted CET-1 ratio after considering the H1 profit accretion and risk-weight impact was pegged at 10.5 percent,” analysts said. SBI share price was at Rs 611 at the close of the previous session.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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