Sunil Singhania’s insights offer valuable information for investors and business leaders, helping them make informed decisions in the current market landscape. Even though there are challenges in the cement space, the increased infrastructural spending presents opportunities for growth. Additionally, the pharmaceutical sector’s rising penetration and affordability indicate promising prospects for domestic market-focused players. Moreover, the better-than-expected performance of the banking sector underscores its resilience and adaptability in a dynamic economic environment.
Even as India’s infrastructure spending has shown a positive trend, with an increase of at least 8 percent, the demand in the cement space has not been as robust as expected, said Sunil Singhania, leading investment advisor and Founder of Abakkus Asset Management.
Sharing his sector insights in an interview with CNBC-TV18, Singhania touched upon various sectors, including cement, pharmaceuticals, and banking.
According to Singhania, the infrastructure spending has shown a positive trend, with an increase of 8 to 9 percent. This rise in infrastructural investments indicates a high demand for cement, as it plays a crucial role in construction and development projects. However, the demand in the cement space has not been as robust as expected.
“The challenge is that last three-four years, the demand has not been good and therefore even some incremental supply causes a little bit of imbalance particularly region wise. But if you are banking on the infrastructure spending that is happening at a rate of 8-9 percent in terms of demand annually, you need 120-130 million tonne of cement capacity in three years, which is not going to be very easy,” he said.
However, the pharmaceutical sector seems to be experiencing significant developments with increasing penetration and affordability of healthcare products.
Singhania highlighted that domestic market-focused players within the sector are better positioned to benefit from these trends. As the accessibility of healthcare improves, companies catering to the domestic market stand to gain a competitive advantage.
Singhania also expressed optimism about the performance of banks, indicating that they have fared better than initially expected.
“Sectors like banking, which we were expecting to do well have done better than what was anticipated,” he said.
This positive trend in the banking sector can be attributed to various factors such as prudent financial management, robust lending practices, and the overall economic growth trajectory.
For more details, watch the accompanying video
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HDFC Bank vs SBI vs Axis Bank: Top bank stocks to buy, sell or hold amid strong growth signals
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Analysts are positive on select banking stocks but have downgraded IDFC First Bank. They prefer banks that can deliver strong growth (both deposits and advances), have positive return on assets (RoA) bias, visibility on managing director and chief executive officer continuity and reasonable valuations.
Both domestic or foreign traders have their eyes on the Indian banking space, particularly at a time when the Nifty Bank index has been under pressure in June so far. The index has witnessed heavy profit booking after scaling its all-time high of 44,498.60 levels on June 16, 2023.
The banking index is down about 0.43 percent in the last one month while the benchmark Nifty50 has risen about 1.18 percent. The subdued show of the Nifty Bank index is one of the reasons why Nifty50 is yet to hit its life-time high level despite hovering near it for the last few weeks.
Analysts at domestic brokerage house ICICI Securities are positive on select banking stocks but have downgraded IDFC First Bank. Axis Bank
Analysts prefer IndusInd Bank, Axis Bank and HDFC Bank among large private banks and State Bank of India and Karur Vysya Bank among the public sector undertakings (PSUs) and regional banks, respectively. “We maintain our hold rating for Kotak Mahindra Bank due to MD and CEO succession and subdued RoE (return on equity). Post the recent rally, we downgrade IDFC First Bank from add to hold,” the note stated.
Top picks
IndusInd Bank: Despite less than the desired three-year term extension for its MD and CEO recently, analysts prefer IndusInd for rising RoAs along with healthy growth visibility, stable NIMs and reasonable valuations.
HDFC Bank: On the other hand, analysts like HDFC Bank for its strong execution on both liabilities and advance growth, with superior track record on asset quality and return ratios. “We see the merged entity delivering impressive 1.9-2 percent RoAs, though RoEs should be optically lower at 15 percent on lower leverage but current valuations are compelling,” it said.
Analysts expect re-rating for HDFC Bank post the consummation of merger with HDFC Ltd and resolution of technical issue pertaining to the ownership.
Axis Bank: With Citi deal having already consummated and front-loaded opex (operational expenditure), analysts see higher visibility of Axis Bank delivering above-industry growth along with sector-leading RoEs at 17-18 percent.
Kotak Mahindra Bank: Analysts believe KMB should continue to deliver strong advances growth though they see sharp NIMs (net interest margins) moderation off the high base, leading to moderation in RoAs going ahead. Due to the impending management succession, analysts see capped upside, driving its ‘hold’ rating.
SBI: Within PSU banks, analysts like SBI due to its strong retail (liability and advances) franchise, low loan-to-deposit ratio (LDR) while low net NPAs and strong provisioning coverage ratio (PCR) should ensure a strong 0.9 percent RoA and over 15 percent RoE. going ahead. SBI is also likely to be the early beneficiary of corporate capex (capital expenditure) revival and moderation in G-Sec yields, the report said.
Book value growth to remain strong
Despite the initial scare, the Indian banking system has emerged strongly post the COVID pandemic in the form of all-time high Common Equity Tier 1 (CET-1) levels, decadal-low gross or net non-performing assets and strong contingent provisions, ICICI Securities said in its research note.
FY23 has been a good year for the banking system with credit growth touching multi-year high and NIMs rising to the highest level in a decade. Strong net interest income (NII) growth has more than offset small headwinds on treasury and opex intensity, driving the highest RoAs or RoEs in the last 8-10 years.
Going ahead, analysts expect credit growth to decelerate, but still be healthy at 13-14 percent CAGR (compound annual growth rate) over FY24-25E. Post- 21-23 percent year-on-year rise in NII and core pre-provision operating profit (PPOP) in FY23, analysts see growth tapering down to 13-15 percent year-on-year in FY24E (and then improving to 15-17 percent year-on-year) for our coverage private banks.
As against the 35-40 percent year-on-year growth in the last two years, analysts see PAT (profit after tax) growth for private banks moderating to 15-16 percent for FY24/25E. “Unlike steeply rising RoAs or RoEs trajectory in the last three years, we see broadly stable RoAs or RoE for FY24-25E, which along with slight moderation in credit growth or NIMs, which could limit the re-rating potential of valuation multiples in the near term, in our view,” it said.
However, strong double-digit book value growth, strong balance sheet and reasonable valuations provide comfort, believe analysts.
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Navigating the changing landscape: Banking sector’s future, opportunities, and challenges explored
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Enlightening insights, expert opinions, and groundbreaking revelations emerged when the extraordinary industry leaders gathered.
In the ever-evolving landscape of India’s economy, the CEO Dialogues series continues to captivate audiences with its insightful discussions on key sectors and trends. The first episode set the stage by delving into India’s retail sector. Now, in the second episode, the spotlight shifted to the financial realm, exploring the road ahead for banks in India’s financial sector.
Bringing together a stellar cast of top banking CEOs, the panel embarked on a thought-provoking journey through growth, rates, and beyond. The discussion commenced on an optimistic note as they celebrated the most profitable year for India’s banking sector in FY23, thanks to robust loan growth, higher yields, and reduced credit costs.
Throughout the discussion, the panel tackled a wide range of vital topics, touching upon the sustainability of the banking sector, the impact of disruptive forces, the untapped growth opportunities in rural and semi-rural India, and the emergence of central banking digital currencies (CBDCs). With each speaker contributing their unique perspectives and expertise, the CEO Dialogues succeeded in unravelling the complexities of India’s financial landscape and offering glimpses into the transformative path that lies ahead.
Industry stalwarts and distinguished voices meet at the banking roundtable
Under the guidance of Shereen Bhan, Managing Editor of CNBC-TV18, the finance roundtable featured esteemed personalities – Zarin Daruwala, Cluster CEO — India & SA, Standard Chartered Bank; Govind Singh, MD & CEO, Utkarsh Small Finance Bank; Rajiv Sabharwal, Tata Capital; Ashwini Kumar Tewari, MD, State Bank of India; Prashant Kumar, YES Bank; J Venkatramu, India Post Payments Bank; Kaushik Shaparia, CEO, Deutsche Bank India; Sanjeev Krishan, Chairperson, PwC in India and Gayathri Parthasarathy, Lead – FS Sector, PwC India.
Exploring Monetary Policies, Disruptive Forces, and Transformative Visions in India’s Financial Arena
Shereen Bhan initiated a poll, focusing on the recent monetary policy announcement by the Reserve Bank of India. As the MPC (Monetary Policy Committee) delivered its verdict, leaving the rates and stance unchanged, the question arose: Will we witness a rate cut in the upcoming calendar year or the financial year? The show of hands from the distinguished participants sought to capture their collective sentiment and set the tone for the engaging discourse that ensued.
Watch the complete conversation below
When asked about the expectations for FY24 and the longer-term outlook over the next five years, Sabharwal said that the country will see 6.75% growth this fiscal year. He expects 7.5% growth in the long term. He further emphasises that credit will be a key driver of growth for the Indian economy and the need for banks and NBFCs to collaborate in ensuring the availability of credit at the grassroots level.
Bank-Fintech Partnerships Enhancing Customer Value
Ashwini Kumar Tewari stressed the importance of banks forging extensive collaborations with fintech companies, highlighting their agility and promptness in addressing customer requirements. “We are collaborating with a few fintechs in various aspects. We no longer talk about them as fintechs, they are like partners to us, which should have been the original idea and collaboration I see happening on a very large scale,” he added.
Sanjeev Krishan observed fintech infusion bringing youthfulness to banks. “I think we should celebrate it, including things like more recently CBDC. These are huge enablers for us.”
When asked about partnerships between banks and fintechs, Prashant Kumar said, “we are almost contributing 40% to UPI, and UPI transactions are touching almost 10 billion a month and we are talking about 1 billion every day in the next three years. So I think this kind of partnership has actually helped both of them. And I think everybody has seen that it’s not about each other, it’s about how we can add value to the customer.”
Disruptive Forces and Transformative Technologies
Further, banking experts shared their opinion on key disruptors that could empower banks and fuel operational strength and growth. Gayathri Parthasarathy identified open banking and Generative AI as major disruptors shaping the banking sector’s growth. She added, “Digital transformation is written all over the country and the banking sector. And also in terms of the innovations that are coming across in payments, whether it is UPI, UPI lite, or fintech ecosystem, all are leading to in terms of how the disruptive technologies can help the banks to further strengthen and grow.” Recognizing the fast-changing landscape of technology, customer expectations, and regulations, she also highlighted the importance of talent development and upskilling in the banking sector.
J Venkatramu underscored the importance of a systematic digital infrastructure, citing the success of initiatives like Jan Dhan in creating a scalable and fully digital ecosystem for future growth.
Govind Singh, MD & CEO of Utkarsh Small Finance Bank, recognized the transformative role of technology in rural India, citing the widespread adoption of UPI and QR codes.
Navigating Loan Portfolio Challenges
Sanjeev Krishan emphasised the importance of maintaining a stable trajectory for the Indian economy. He identified the composition of the current loan portfolio as a potential challenge for the banking industry, with rising credit costs impacting consumers and leading to reduced demand for consumer companies. “I am also slightly concerned when we look at the way banks have grown their balance sheets and a lot of it is actually driven by the retail loans. The economy needs to continue to be in good stead. And because of the composition of the loan portfolio, that could be a challenge that they may face,” he added.
CBDC Applications and the Digital Rupee’s Role in Ensuring National Security
Zarin Daruwala explored the versatile applications of CBDC, like the Digital Rupee, in areas like Direct Benefit Transfer (DBT) and niche requirements. She emphasised its targeted use and customizable features, distinguishing it from UPI.
Ashwini Kumar Tewari highlighted the potential of the Digital Rupee as a backup for UPI in ensuring national security. “Something happens to UPI, we have the CBDC. So I think we should also encourage it so that it also comes up as a viable payment mechanism which is kind of a default vis-à-vis the UPI, so that’s something I think we have not considered so far,” he said.
Opportunities in climate finance
Tewari feels that climate finance presents significant opportunities, with interim targets and long-term goals set by India. The opportunity in climate finance till 2030 is estimated to be around Rs 30 lakh crore. This offers the potential to double the loan book of banks, including capturing opportunities in EVs, battery technologies, renewable energy, and other related sectors like battery manufacturing and pumped hydro. According to him, leveraging this opportunity is crucial not only for banks’ growth but also for fulfilling national commitments and contributing to the planet’s well-being.
Conclusion
The insightful discussions on the future of India’s banking sector have shed light on the necessary steps to unlock its true potential. Recognizing the heterogeneity of the market, customization, personalization, and digitization have emerged as crucial challenges to address. The responsibility now lies with the participants to invest their resources and expertise in tackling these challenges head-on.
Looking ahead, the CEO Dialogues will continue its mission of fostering meaningful dialogue by hosting panel discussions on other pivotal sectors such as Manufacturing and Health Industries. These discussions will further contribute to a comprehensive examination of India’s dynamic business landscape.
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Strong loan growth, higher yields and lower credit cost ensured FY23 was the most profitable year for India’s banking sector. But what’s the road ahead for India’s financial sector? Here’s what Chairperson of PwC in India, Sanjeev Krishan told Shereen Bhan of CNBC-TV18 at the PwC Banking Dialogues.
Chairperson of PwC in India, Sanjeev Krishan, in an exclusive interview with Shereen Bhan of CNBC-TV18 at PwC Banking Dialogues, highlighted the need for the Indian economy to maintain a stable trajectory as he believes the composition of the current loan portfolio could pose a challenge to the banking industry. He said the rising credit cost has started to affect consumers, and so, consumer companies are grappling with reduced demand.
He said, “If you look at the panel, we did just two weeks back, and we had a bunch of consumer CEOs on the panel, and they told us that growth was slowing down… the credit hike.. .the credit cost is now starting to pinch the consumer. I think it is definitely a good time from the bank’s standpoint… I think the fact that they have cleaned up the balance sheets, the NIMs are going up over the last two years. I think they are all good things.”
“But I am also slightly concerned when we look at the way banks have grown their balance sheets and lot of it is actually driven by the retail look. The economy needs to continue to be in good stead, and there are certainly areas that were identified… which could challenge the economy… and because of the composition of loan portfolio, that could be a challenge that they may face,” he added.
“I think we have had good few years …because geopolitically India seems to be in a good position. But there could be some bumps, and I am sure banking industry would be up for it,” he said.
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FMCG, banking and IT stocks are key for Sensex to hit a new record high
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
FMCG, bank and IT sectors are known to be the backbone of the Indian stock market. They have consistently shown steady growth, even in the face of economic uncertainties.
FMCG (fast-moving consumer goods), bank, and IT sectors are crucial for the market to hit new highs and without their contribution, it would be challenging for the market to grow and reach new heights. These sectors collectively account for a significant portion of the market’s growth potential, making their participation vital for overall market success.
These three sectors are known to be the backbone of the Indian stock market. They have consistently shown steady growth, even in the face of economic uncertainties. The FMCG sector comprises companies that sell everyday products such as toiletries, food, and beverages. The bank sector includes banks and financial institutions that provide financial services such as loans, deposits, and investments. The IT sector comprises companies that provide information technology and software services, such as IT consulting, software development, and business process outsourcing.
In an interview with CNBC-TV18, Rahul Arora, CEO of Nirmal Bang Institutional Equities said that FMCG, bank, and IT sectors account for 60 percent of the market.
He said, “If you take FMCG, IT, and banks – that is about 60 percent of the market and add Reliance to it – that is about 75 percent of the market. Reliance looks to be doing its own thing, but if these three sectors do not participate from an earnings perspective, it’s a little hard to make a case for the market moving higher or even making new highs.”
Arora highlighted that for the market to achieve new highs and sustain upward momentum, the active involvement of the FMCG, bank, and IT sectors is crucial. These sectors play a pivotal role in driving economic growth and are closely intertwined with the everyday lives of individuals, businesses, and the overall economy.
The Indian stock market has seen significant growth in recent years, with its total market capitalization currently hovering around USD 3 trillion. The contribution of the FMCG, bank, and IT sectors to this growth has been significant, with their combined market capitalization accounting for a significant portion of the market’s total value.
Disclaimer: Network18, the parent company of CNBCTV18.com, is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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Market watchers bullish on banking stocks, eye on Axis Bank valuations
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Despite the impressive performance of some banks, Krishna Kumar Karwa, from Emkay Global, noted that earnings upgrades across the board have been few and far between. This suggests that while the overall banking sector has recovered from lows in the last 30-45 days, there may still be some room for improvement in terms of earnings.
The banking sector in India has shown resilience. With strong performers like HDFC Bank and ICICI Bank, as well as potential value opportunities like Axis Bank, there are options available for investors looking to tap into the sector’s growth potential.
Indian banking numbers have been and will continue to be strong, according to Santanu Chakrabarti, India Analyst-BFSI at BNP Paribas.
“Banking numbers have been strong. But the numbers that stood out for me in this quarter is our top pick HDFC Bank,” he said.
HDFC Bank has particularly stood out with its impressive performance, positioning itself as a leader in the sector. ICICI Bank also garnered recognition as the second pick after HDFC Bank.
“Amongst the large banks, my pecking order is HDFC Bank followed by ICICI Bank. My top beta pick is Axis Bank and that is mainly on account of it being perhaps the best liability beta play out there,” he said.
However, Axis Bank’s valuations are on the cheaper side, which could be an attractive option for investors looking for a bargain. It is important to note that valuations are only one aspect of a company’s worth and should be considered alongside other factors before making any investment decisions.
Despite the impressive performance of some banks, Krishna Kumar Karwa, from Emkay Global, noted that earnings upgrades across the board have been few and far between. This suggests that while the overall banking sector has recovered from lows in the last 30-45 days, there may still be some room for improvement in terms of earnings.
“Numbers have been very good for banks and banks have recovered from their lows in the last 30-45 days but in terms of valuation multiples will we see an expansion of further valuation multiples or are most of the banks now getting into a territory where they could be earnings compounders? So that is the key question that one should be focusing on. The results have been broadly – I have not seen too many earnings upgrades across the board” he said.
Overall, the banking sector in India has shown resilience. With strong performers like HDFC Bank and ICICI Bank, as well as potential value opportunities like Axis Bank, there are options available for investors looking to tap into the sector’s growth potential.
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The largest cryptocurrency in the world has jumped by around 70 percent in 2023 so far, following a harrowing 2022 in which industry-wide collapses slashed the demand for digital currencies.
Soon after First Republic Bank revealed in its quarterly report on April 24 that its high-net clientele was pulling out deposits, Bitcoin’s price jumped on the charts, recording its biggest daily gain in a week.
Over the next two days, Bitcoin’s gaining spree continued as it racked up another 6 percent gain and briefly touched the $30,000 threshold before profit-taking kicked in.
The largest cryptocurrency in the world has jumped by around 70 percent in 2023 so far, following a harrowing 2022 in which industry-wide collapses slashed the demand for digital currencies.
At one point, Bitcoin fell to $15,500, a 77 percent discount compared to its November 2022 all-time high.
Several analysts predicted that Bitcoin’s losing streak would continue in 2023, owing to macroeconomic headwinds and a weakening US economy. However, Bitcoin has so far disappointed bearish forecasters while pleasantly surprising bulls.
Its performance in March was particularly noteworthy as the king coin recorded its second-highest monthly gain in 17 months, jumping 23 percent and convincingly breaking above the $24,000 barrier.
Meanwhile, Wall Street investors were left scratching their heads after the S&P 500’s heavily reliant financial sector fell 9.74 percent in March following a spree of bank closures in what has been dubbed the “US Banking Crisis”.
On April 1, First Republic Bank became the latest addition to the crisis after facing a liquidity shortfall that forced JP Morgan to take over its operations. The bank’s quarterly report revealed that customers had initiated deposits worth over $100 billion since rating agencies began downgrading its credit ratings in March.
Is Bitcoin’s gain during the banking turmoil a coincidence, or are there more legs to the story? Let us rewind the clock a little bit. During the second week of March, California-based Silvergate Bank, whose Chief Executive had personally invested in Bitcoin, went belly after customers initiated mass withdrawals.
The news came on the back of high-profile bankruptcies in the crypto sector, namely FTX, which was a client of Silvergate.
During the same time, Bitcoin’s price fell sharply, slipping below the $21,500 support mark. The initial commentary implied that the cryptocurrency sector’s woes had spread to Wall Street and that financial firms exposed to the distressed market would experience difficulties.
The same did not bode well for Bitcoin, which continued to bleed on the charts. Between March 8-11, Bitcoin declined by as much as 13 percent, hitting a near 2-month low at $19,500.
Shortly after, Silicon Valley Bank (SVB) and Signature Bank, two more companies under the Wall Street banner, collapsed in spectacular fashion. Silicon Valley Bank chose to close its doors on March 10 due to a lack of liquidity to meet its operational needs.
Previously, the bank stated that it required $2.25 billion to buttress its balance sheet. As fears of banking contagion forced many to withdraw their bank deposits, Signature Bank was also unable to continue operating in a difficult environment.
But Bitcoin, which initially fell after Silvergate’s collapse, moved in the opposite direction this time around. Between March 11-24, Bitcoin soared by over 40 percent and headed toward the $30,000 mark. These gains were the highest that Bitcoin had seen since January when its value picked up from $16,000 to hit $24,000.
Many were surprised to see money pouring into digital assets after the banking crisis prompted regulators to crack down hard on crypto businesses. In recent times, top crypto exchanges such as Binance, Coinbase, and Kraken, have faced scrutiny over their operations by US watchdogs.
What is the correlation here?
Another important aspect to consider here is that the crypto sector was thought to be loosely connected to Wall Street indices, particularly the S&P 500. Although the S&P 500 posted single-digit gains in March, the financial sector’s poor performance raised concerns that the ’too big to fail’ label would come undone. The same could have negatively impacted the crypto market as well.
This brings us to the next question – Why is Bitcoin rising? There are several answers, but none can be confirmed until the events continue to unfold in the coming months. The base argument here is that investors are pouring money into cryptocurrency because the banking crisis supports the image of cryptocurrency as a decentralized alternative that does not rely on a third party for its price.
Another argument is that crypto’s potential as a hedge against inflation has picked up in recent times following a sharp increase in the value of goods and services across the world.
However, a New York Times article introduced another element in the mix by stating that the gains had little to do with Bitcoin’s technological philosophy. Instead, optimism about potential rate cuts and questions about the safety of stablecoins had a bigger effect on Bitcoin.
Speaking to NYT, an analyst said that the flows were just going out of stablecoins and into Bitcoin. The banking sector’s downfall threatened funds held by Circle, one of the biggest stablecoin issuers. As per NYT, traders who held large amounts of stablecoins are looking for alternate investments.
Conclusion
As mentioned earlier, it is difficult to say whether fundamentals are driving Bitcoin’s price, or sentiment. This is mainly because Bitcoin is yet to solidify its position in the market.
On some occasions, it is placed beside gold as a safe haven investment, and on the other, it is viewed as a risky and volatile investment.
Where Bitcoin’s price will land by 2023 end and will the banking crisis fuel Bitcoin’s price, are questions that can only be answered once the market matures further in the coming months.
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Indian banks’ deposits and loans grew at record speed but borrowing may hit a bump
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
In the upcoming Q1FY24 results, it is expected that the net interest margin of lenders will decrease. This can be attributed to the rise in the cost of funds for lenders, as most of the lending rate hikes have already taken place.
The banking sector witnessed remarkable progress in FY23 as both incremental deposit and loan growth reached unprecedented levels of Rs 15.78 lakh crore and Rs 17.83 lakh crore, respectively.
As a result, the incremental credit-deposit ratio for the banking industry hit a 15-year high of 113 percent. This is good news for lenders, particularly in a scenario of increasing interest rates, as a rise in the CD ratio is likely to support net interest margins (NIM) and prevent a sharp decline.
(The CD ratio tells us how much of the money banks have raised in the form of deposits has been deployed as loans. A low CD ratio suggests relatively poor credit growth compared with deposit growth. A high CD ratio would mean strong demand for credit in an environment of relatively slower deposit growth.)
In the April to June 2023 quarter of FY23, banks are expected to see the net interest margin decrease. This can be attributed to the rise in cost of funds for lenders as most of the lending rate hikes have already taken place.
For FY23, the banking sector reported deposits of Rs 180.44 lakh crore and loans of Rs 136.75 lakh crore, leading to a credit-deposit ratio of 75.8 percent. This ratio is the highest in the past three years, up from 72.2 percent the previous year.
Deposit data shows, there has been a decrease in the incremental growth of demand deposits, which is the lowest in the past three years. On the other hand, there has been a significant increase in incremental growth of term deposits to the best ever for a fiscal year.
It should also be noted that due to rise in interest rates in FY23, some low-cost deposits may have been shifted to high-cost term deposits.
As of February 2023, personal loans have been the major contributor to loan growth in FY23, as per sectoral data. The incremental loan growth from March 2022 to February 2023 amounts to Rs 15.6 lakh crore. Personal loans constitute 40.2 percent of the incremental loan growth, followed by services at 32.5 percent, agriculture at 12.5 percent, and industry at 8.9 percent.
As of February 2023, there has been a year-to-date decline of Rs 19,734 crore or 1.3 percent in food credit.
Breaking down the loans by industry as of February 2023, personal loans account for 29.84 percent of loans, followed by services at 26.2 percent, agriculture at 24.47 percent, industry at 12.3 percent, food credit at 6.92 percent, and others at 0.26 percent.
Looking ahead, there could be a slowdown in loan growth as higher principal repayments may also contribute to a decline in the loan growth rate. Additionally, inflation may pose a challenge to loan growth for the banking sector in the coming quarters.
The deposit momentum will be a crucial factor to monitor. There is a competition for deposit rates, with HDFC Bank offering one of the highest term deposit rates among large peers.
Private banks are focusing on branch expansion to increase their balance sheets. On the other hand, several PSU banks have witnessed an increase in their balance sheets due to their foreign books.
However, given the slowdown in the global economy, it is important to keep a watch on the performance of the overseas book for some of these PSU banks.
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Brokerages say peaking of interest rate cycle and fall in incremental system LDR could be positive for HDFC Bank
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Most brokerages have a buy or outperform rating with target prices in range of Rs 1,900 to Rs. 2,200. Nirmal Bang says “aggressive branch expansion is leading to higher opex and is likely to remain elevated in the near term as the focus is to expand the branch network.” Macquarie views savings from credit costs to be used to drive the operating expense. USB says the peaking of interest rate cycle and fall in incremental system LDR, could be positive this time around unlike previous cycles.
HDFC bank numbers are nearly in line with estimates for fourth quarter of financial year 2022-23. The bank reported strong NII growth of 23.7 percent on a year on year basis at 23,351 crore, while the retail loan growth was strong rising 29.8 percent year on year and 9.75 percent on a quarter on quarter basis.
Operating profit growth came in lower at 13.8 percent year on year and declined by 2.1 percent quarter on quarter due to lower treasury income and elevated operating expenses. Nirmal Bang says “aggressive branch expansion is leading to higher opex and is likely to remain elevated in the near term as the focus is to expand the branch network.” The brokerage has a Buy rating with a target price of Rs 1,958. However, the brokerage remains cautious about merger transition, which along with elevated opex and the margin trajectory would be a key monitorable going forward.
Macquarie has an outperform rating with a target price of Rs 2,110 and views the operating expense to remain elevated and savings from credit costs can be used to drive the operating expense. Another brokerage, Bernstein also has an outperform rating with target price of Rs 2,200 and says the key positives from the bank’s results are healthy 21 percent growth in deposits despite system deposit growth being 10 percent and continued pace of branch additions of 630 branches in quarter taking full year additions to 1,500 branches.
UBS has a buy rating on the stock with target price of Rs. 1,900. The brokerage says the peaking of interest rate cycle and fall in incremental system LDR, could be positive this time around unlike previous cycles. CLSA says asset quality provides P&L cushion.
What has not worked for the bank in the past quarter is the rise in interest expenses. Further, cost to income ratio is the highest in 25 quarters and corporate loan growth on year on year basis is below the overall loan growth. The stock starts the session with less than 1 percent gains today.
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Job vacancies in BFSI broke all records in March 2023 amid ongoing global bank crisis: Report
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
According to the report, the Insurance and Banking sectors are witnessing a surge in job creation, significantly contributing to the upward hiring trend in the overall white-collar job market of India.
Amid the ongoing global turmoil in the banking sector, job vacancies in the Banking Finance Services and Insurances (BFSI) sector broke all records, as the Naukri Jobspeak Index for Banking reached an all-time high of 4,555 in March 2023 compared with 3,138 in March 2022.
As per the Naukri.com report, beyond BFSI, the hiring landscape in India displayed cautious optimism where the Naukri JobSpeak Index in March 2023, stood at 2979, up 5 percent over last year and flat against last month.
Banking Finance Services and Insurances (BFSI) Sector
According to the report, the Insurance and Banking sectors are witnessing a surge in job creation, significantly contributing to the upward hiring trend in the overall white-collar job market of India.
In March 2023, the insurance sector recorded a growth of 108 percent in new job creation, compared to March 2022. The banking sector displayed a 45 percent year-on-year growth fueled by the expansion of digital banking services in the rapidly evolving global economy.
The report also said that the vacancies in cities of Ahmedabad, Vadodara and Kolkata increased by 145 percent, 72 percent, and 49 percent respectively.
The IT sector, on the other hand, witnessed a decline of 17 percent in new jobs created compared to March last year. The hiring intent declined across both large IT giants and unicorns, while hiring for early-to-mid stage startups remained stable with respect to the same period last year.
The report also suggested that vacancies for high-demand roles such as big data engineers, DevOps, and software development engineers, which were on a growth path until recent times, declined in March 2023 by 20 percent, 9 percent, and 6 percent, respectively. However, the demand for emerging roles like machine learning saw an uptick, it added,
Non-Tech sectors
Job creation in non-tech sectors such as Oil, Real Estate, FMCG, and Hospitality increased by 36 percent, 31 percent, 14 percent, and 7 percent, respectively, compared to last year’s base.
However, specific Non-Tech sectors such as retail, education, and BPO saw a 4 percent, 2 percent, and 2 percent decline in hiring activity, respectively.
Job Creation in Metro/ Non-Metro cities
As per the report, among the non-metro cities, Vadodara leads hiring trends with a 50 percent growth in new job creation compared to last year, followed by Ahmedabad, Jaipur, and Kochi with 49 percent, 29 percent, and 13 percent growth respectively.
In metro cities, Mumbai and Delhi/NCR observed positive hiring momentum, with 17 percent and 7 percent growth in new job creation, respectively. Whereas, Bangalore, Hyderabad, and Pune, heavily reliant on the IT sector, experienced a decline of 12 percent, 11 percent, and 2 percent respectively.
Majority of job growth in metro cities was also driven by non-IT sectors such as insurance, real estate, and automotive sectors, the report said.
Mid-Level Professionals Back in Demand
The mid-level professionals experienced a significant increase, registering a 14 percent growth compared to the previous year—following a period of stagnation in recent months. In contrast, hiring activity for entry-level professionals remained unchanged compared to last year.
Commenting on the report, Pawan Goyal, Chief Business Officer, Naukri.com, said, “The BFSI sector’s growth in a cautious job market signals resilience of the Indian economy and the expanding horizons of the white-collar job landscape. Non-metro cities are proving to be the catalysts for change, redefining the employment narrative in India.”
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