1. 22 March 2012
Update
India Banking
Loan growth improves while deposit growth
moderates further; CD ratio at historical high
RBI released the banking sector business data for the fortnight ended 9th
March 2012. Key takeaways:
Loan growth improved to 16.3% YoY v/s 15.6% in previous fortnight.
Absolute loans increased by INR792b v/s increase of INR251b a fortnight
ago and increase of INR449b a year ago. Deposit growth moderated further
to 13.8% YoY v/s 14.3% a fortnight ago.
Loans in absolute terms are up by ~INR5.5t YTD whereas deposits have
increased by ~INR6.5t during this period. In percentage, YTD loan and
deposit growth stood at ~14% and ~12% respectively.
To achieve RBI’s loan growth target 16% YoY, further increase of INR822b
would be required in last fortnight of March-2012 as against INR806b
recorded in the corresponding year ago fortnight.
CD ratio improved by 86bp and remained elevated at 76.7% (at historical
highs) v/s 75.8% a fortnight ago. TTM incremental CD ratio improved
further to 88.7% v/s 81.7% a fortnight earlier.
Growth in investments continued to remain healthy (+INR202b) during the
fortnight which led to 10bp improvement in SLR ratio (27.6% v/s 27.5% a
fortnight earlier).
Loan growth improves to 16.3% YoY; Deposit growth moderates further
to 13.8% YoY
Loan growth improved after continued moderation for three fortnights to
16.3% YoY v/s 15.6% in previous fortnight. In absolute terms, loans
increased by INR792b v/s increase of INR251b a fortnight ago and increase
of INR449b in the corresponding year ago fortnight.
Non-food credit grew by INR785b (v/s increase of INR235b in the previous
fortnight and increase of INR442b a year ago). Non-food credit growth
improved to 16.1% YoY v/s 15.4% a fortnight earlier.
Deposit growth continued to moderate and stood at 13.8% YoY v/s 14.3% a
fortnight earlier. In absolute terms, deposits improved by INR379b v/s
INR150b in previous fortnight. Borrowings during the fortnight increased by
INR13b and stood at INR1.8t.
We expect loan growth for FY13 to be at 15-16% due to low investment
demand, lag impact of slowdown in investment activity on other segments
and continued macroeconomic uncertainty.
1
2. India Banking
CD ratio improves to 76.7%; YTD CD ratio stood at 84%; SLR ratio at 27.6%
CD ratio improved further by 86bp and remained elevated at 76.7% v/s 75.8% a
fortnight ago. TTM incremental CD ratio improved to 88.7% v/s 81.7% a
fortnight earlier.
YTD FY12, incremental CD ratio stood at 84% (highest since beginning of the
year) v/s 77% in previous fortnight.
SLR ratio improved to 27.6% v/s 27.5% a fortnight earlier. SLR investments
improved by INR202b during the fortnight.
Loan growth improves to 16.3% YoY
however deposit growth continues to moderate
:
as a consequence CD ratio remains elevated
Loans (absolute) pick up on a fortnightly basis (INR b)
:
22 March 2012
:
:
2
3. India Banking
so do deposits (INR b)
SLR ratio improves to 27.6%
:
:
Outlook and view
22 March 2012
Downward trend in inflation and moderating growth present a compelling case
for reversal in interest rate cycle. Surprise move by RBI to reduce CRR ratio by
75bp recently 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 INR1.34T 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.
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5. India Banking
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India Banking LTD
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22 March 2012
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