1. 3 April 2012
Update
India Banking
Industry contributes ~61% of incremental loan
growth YTD; Agri growth improves; Retail still muted
RBI released monthly credit deployment data of scheduled commercial banks
for month ended Feb-2012. Key takeaways:
Non-food credit growth moderates further to 15.4% YoY as compared to
15.9% in Jan-12 and 22.8% a year ago. On a YoY basis, Industrial loan
growth (19%) continues to outpace retail loan growth (~11%) and
Agriculture growth (muted at ~8%). Services grew largely in-line with overall
loan growth. Industrial loan growth excluding infrastructure stood at 19%.
YTD (Feb over March) loan growth stood at 12% v/s 17% in the
corresponding year ago period. Agriculture loan growth continues to lag
overall loan growth and its share has come down to 11.6% (improved 10bp
on MoM basis) v/s 12.6% in March 2011 and 12.3% a year ago. On a YTD
basis, Agri loans grew only 3% agriculture segment, though there has been
some improvement over past few months. Moderation in agri loan growth
could be attributed to cautious stance adopted by banks due to higher NPA
in the segment and also due to reclassification of definition by RBI where
certain agri. allied credit has been disqualified from March 2011.
In industrial loans (up ~19% YoY), strong contribution was witnessed from
Mining (+40% YoY on a lower base), Metals (+22% YoY), Gems and Jewelry
(+28% YoY) and vehicle and transport equipment (+25%). Growth in
infrastructure segment moderated to 19%. With infrastructure power
(+23%), roads (+26%) and other infrastructure (+30%) continues to report
healthy YoY loan growth. Growth in telecom segment continues to decline
(down 6% YoY and 8% YTD) and now it forms 2.2% of overall loans as
against 2.8% a year ago.
Services segment grew 15.2% YoY largely driven by NBFCs (+31% YoY, an
area of concern). On a YTD basis (Feb over Mar), services grew ~10% driven
by NBFCs (~18%), Tourism (+13%) and Trade segment (+14%).
Overall personal loan growth moderated further to 11.4% YoY. However
personal loans grew ~9% YTD. Housing loan growth moderated to 11.2% v/s
13.2% a month ago; YTD growth stood at ~10%. Some of the other retail
products like vehicle loans, education loan and credit card have grown
strongly by 18% YTD, 15% YTD and 14% YTD, respectively, led by higher
focus of private sector banks on this segment. Growth in consumer durable
segment continues to remain under pressure with it declining by ~14% YTD.
1
2. India Banking
Industrial loan continues to be the key share in overall loan growth
Industrial loans driven by mid-sized and large corporate; Mining, Infra and
Metals remain key drivers
Industry loan growth driven by large and mid corporate: Industrial segment
loans grew ~19% YoY (v/s 20% in Jan-11 and ~27% a year ago). Large corporate
loans grew ~20% YoY whereas mid-corporate loan grew 21% YoY. While on a
MoM basis, growth was led by mining, sugar, rubber and plastic products,
fertilizers, metals and construction, decline was seen in petroleum, beverage
and tobacco and telecom segments. MSME credit continues to lag overall
growth however on a lower based improved to 13.5% as against 9% a year ago.
Power sector growth buoyant….: Power sector loans grew ~23% YoY and ~19%
YTD, largely driven by higher disbursements to private sector developers, in our
view. Share of power sector loans in overall loans have increased to 7.8% (stable
MoM) v/s 7.3% in FY11 and a year ago.
… as also roads: Buoyancy in Road segment continued with loan growth of 26%
YoY and 22% YTD. Share of Roads in overall loans increased to~ 2.8% (stable
MoM) v/s 2.5% in FY11. Within infrastructure, telecom growth continued to
decline (down ~6% YoY and 8% YTD).
Overall share of infrastructure has increased to 14.8% v/s 14.4% in FY11 and
14.1% a year ago. YTD infrastructure loans have contributed 18.7% of
incremental loans (of which power contributed ~62% of incremental
infrastructure loans). Excluding Infrastructure, non-food credit growth stood at
14.8%.
Retail loan growth moderates further; service sector in line with overall
loan growth
3 April 2012
Retail loan growth moderates MoM: Retail loans grew 11.4% YoY v/s 12.7% in
Jan-12 (~16% in Feb-11). With interest rate being at an elevated level housing
loan (largest contributor at 51% of retail loan) growth declined to 11.2% YoY v/s
15.2% a year ago (~13% in Jan-12). Growth in consumer durable segment
continues to remain under pressure with it declining by ~14% YTD.
However some of the other key retail products like vehicle loans, education loan
and credit card have grown strongly by 18% YTD, 15% YTD and 14% YTD,
respectively, led by higher focus of private sector banks on this segment.
Growth in service segment remains in-line with industry: Loans to Services
segment grew at 15.2% YoY (v/s 15.5% in Jan-12 and 24% in Feb-11). On a YTD
basis (Feb over Mar), services grew ~10%. NBFC posted highest growth (up 31%
YoY and ~18% YTD) among all segments and its share in overall loans increased
to 5.1% v/s 5% a month ago and 4.5% a year ago. Tourism (+13%) and Trade
segment (+14%) were the other two key sectors which reported strong YTD
2
3. India Banking
growth whereas growth in real estate segment was relatively muted (+7.5%
YTD)
Outlook and view
3 April 2012
Downward trend in inflation and moderating growth present a compelling case
for reversal in interest rate cycle. Recent move by RBI to reduce CRR ratio by
75bp increases the evidence for the same. Increase in liquidity and reduction in
interest rate could significantly alter the growth and asset quality outlook which
would be positive for financials.
In CY12 YTD, average liquidity infusion by RBI stood at ~INR1.3T and still remains
at an elevated level of ~INR1.5T i.e. above the RBI comfort zone of +/- 1% of
NDTL. Thereby further liquidity easing measures by way CRR and OMO cannot
be ruled out.
While slippages have declined, higher restructuring of loans in 3Q and expected
in 1HCY12 remains a concern. Some of the big ticket restructuring like SEBs,
Airlines, GTL, etc are already getting modeled in, and credit costs estimates
remain high. Improvement in growth outlook and lower rates can help mitigate
some of these concerns in 2HCY12.
Our preferred bets: PSU banks – SBIN and PNB; Private banks – ICICIBC; Midcap
banks – YES and INBK.
3
4. India Banking
Industry remain a key driver of gr. Agri loan gr. improves (YoY gr, %)
Contribution of all segment remains largely stable (%)
:
Incremental loan mix shifts in favor of industry and agri. segment (%)
:
Infrastructure Loan growth remains healthy(%)
:
Power contribution remains high; telecom contr. declines
Major contributors to the services segment (%)
:
3 April 2012
:
:
4
5. India Banking
Services growth driven by NBFC segment
Real estate loan growth moderates further (%)
:
:
Housing credit growth moderates (%)
:
3 April 2012
5
7. India Banking
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