Fundamental Analysis of Sectors- Banking industry

Podcast Duration: 7:13
Voice over: Hello doston, ek auur super-interesting, fundamental analysis special podcast mein aapka swagat hai.

Doston, yeh toh aap sab bhi jante hai ke Covid auur uski vajah se imposed lockdown ka effect has been disastrous for the economy. Last year jaise hi first lockdown declare hua, Sensex and the Nifty both crashed. Businesses, both large and small, were massively affected and revenue- chahein woh kisi badi blue-chip listed companies ka ho ya aapke bagal wali doodh-sabji ki dukaan ka ho- slumped significantly.

Lockdowns ka massive impact economy pe dekha ja sakta hai and banking industry mein aaj sabse bada darr yeh hai ke after two spells of lockdown there might be a massive-buildup of NPAs yaane ki non-performing assets in the economy.

Non-performing assets woh loans hai jispe borrowers default kar chuke hai ya fir unke past dues abhi bhi baki hai.

All of this must be sounding quite dark and dismal but market experts are optimistic that major private banks and a select few public banks are well placed to absorb the shock of the rising NPAs thanks to their provisioning.

Ab aap poochoge provisioning kya hota hai?

Provisioning is when a bank marks out a loan as a loss and sets aside income from its profit and other reserves to absorb that loss in the future. Market experts acknowledge the fact that collection efficiency has gone down in April and May of this year and cheque bounce rates have also gone up. However, not all is doom and gloom. With the markets re-opening and the second lockdown lifting, there has been a pickup in collections. The rise in Gross NPAs is also expected to be lesser than what was seen after the first spell of lockdown.

Market experts ka kehna hai ke macro-economic uncertainties and third wave ki impending threat ko dekhte hue banks will continue to keep their provisioning high. Meanwhile, earnings of large private banks are expected to rise considering the lower cost of funds. Large private banks that have a strong bank branch network can be expected to capitalise on this situation.

Going ahead, analysts expect credit disbursement to rise to Rs 48 lakh crore growing by a rate of over 7.5% on a year-on-year basis. This credit growth will be led by growth in home, auto and gold loans as well as loans to MSMEs. Analysts ka yeh bhi kehna hai ke private banks which have a healthy capitalisation will grow at the rate of 8-10% and will continue acquiring a larger market share from public sector banks.

Aaiye, ab kuch major private and public banks pe nazar delta hai.

First off, let’s start with HDFC bank:

HDFC bank delivered a strong credit growth of 14.4% on a year-on-year basis which is miles ahead of the ecosystem credit growth of 5.5%. HDFC bank clocked in credit disbursement- yaane ki total loans given- of close to Rs 11.47 lakh crore which is a sequential growth of 1.3% compared to the last quarter figures of 11.32 lakh crore. Deposits also registered a strong growth growing at 13% on a YoY basis and the CASA ratio grew by 46%. Net interest income grew by 9.7% YoY to 17,191 crore. In its quarter ending June 2021, the country’s largest private bank reported a 16.1% year-on-year (YoY) rise in net profit. Their net profit for the quarter stood at ₹7,729.64 crore compared to a net profit of ₹6,658.62 crore in the corresponding quarter a year ago.

State bank of India For the quarter ended March 2021, the largest public sector bank in India reported a standalone net profit of Rs 6,450.75 crore. SBI Bank profit after tax rose by a whopping 80% compared to the previous year’s profit of Rs 3,580 crore. Considering a quarterly basis, the bottom line grew by 24.14%. For the quarter ending June 2021, loan growth is expected to be at 5.5% to Rs 25.14 lakh crore. Deposits are expected to grow by 11% on a year-on-year basis. Net interest income is also expected to grow by 4% to Rs 27,600 crore. Delinquencies due to a partial lockdown expected to be at Rs 8,200 crores and Profit after tax is likely to grow to Rs 5,589 crore up by an impressive 33%.

Aaiye, let’s move on to Axis Bank

For the quarter ending March 2021, Axis bank reported an impressive net profit of Rs 2,677 crore as against a loss of Rs 1,387 crore reported in March 2020 quarter. Obviously, Axis bank has recovered from the knock-down effect of the lockdown and has done it pretty well. What is all the more astounding about Axis Bank’s recovery is that it beat the most optimistic profit estimates made by market analysts. Axis Bank also reported an impressive credit growth of 12% compared to the analyst estimate of 7-9%. This growth was led primarily by corporate loans, which grew by a respectable 16%, whereas retail loans grew by 11%. Market experts expect kar rahein ke Axis Bank ka net interest income grow karega by 14% to Rs 7,958 crore. Deposits bhi badhane ke chances hai and analysts ka kehna hai ki they are likely to rise by 12% YoY to Rs 7.03 lakh crore.

All in all, the going is quite great for Axis Bank.

Doston, aaj ke liye sirf itna hi time tha. Banking industry is likely to go through a rough patch in the coming quarters if the number of Covid cases continue to rise. However, macro-economic data coming from the ground has been quite positive and suggests that there is a lot of growth appetite across all segments and banks will be responsible for meeting India’s credit demand. If India doesn’t see the third lockdown, then banks, especially large banks, which have adequate provisions and a large bank branch network can potentially emerge as winners in the long run. Jaane se pehle, ek baat yaad rakhiyega ke stock market investing mein risk hamesha rahega. This podcast has been made for educational purposes only and the investor must do his own research as well. Aise aur interesting podcasts sunne ke liye humein follow karein via youtube and other social media channels. Until then goodbye and happy investing! Investments in the securities markets are subject to market risks. Read all the related documents carefully before investing