Banks to see mixed Q4 earnings

Since October,the central bank has cut its key lending rate by 400 basis points,most recently in early March,as policy focus shifted to boosting demand and arrest slowing growth.

Banks have been lowering benchmark lending and deposit rates to cope with slowing loan demand and to mop up funds for growth.

“Lower credit growth would affect net interest income of banks in the fourth quarter,” said Vaibhav Agrawal,” a sector analyst with Angel Broking.

Banks were also seeing lower working capital requirements for corporates facing higher inventory levels,analysts said.

India’s industrial output contracted 1.2 per cent in February from a year earlier and exports were down more than a fifth.

“Asset quality restructuring will be a key focus in fourth quarter results,” said Bhabesh Kanani of brokerage firm Sharekhan.

Private sector lender Yes Bank will announce results on April 22,while IDBI Bank will report results on April 24.

A Reuters poll expects state-run Allahabad Bank’s net profit to fall 4.30 per cent to 1.62 billion rupees,while IDBI is likely to see a 36.22 per cent fall in profit to 1.56 billion rupees.

State-run Union Bank of India’s net profit is expected to fall 6.67 per cent to 4.86 billion rupees,while private sector lender Yes Bank is likely to see 8.94 per cent fall in profit to 587.33 million rupees.

Concerns over asset quality remained and banks were expected to report a sizeable rise in restructured loans,India Infoline said in research report. Margins pressure was also seen on lack of incremental lending despite healthy deposit inflow recently.

With low loan growth,banks were parking most funds in government securities and non-SLR securities,but hardening of yields would pose pressure on treasury gains,analysts said.

Benchmark bond yields rose 176 basis points in the Jan-March period as investors baulked at a wave of supplies in the closing months of the last fiscal year.

“We expect provisioning expenses on the investment books and bad loans to be higher on account of the rise in G Sec yields and the rise in bad loans,” SBICAP Securities said in a note.

But some banks may post robust numbers. Andhra Bank is set for a 26.42 per cent rise in profit to 1.57 billion rupees,while Indian Bank may post a 21.77 per cent profit rise to 2.94 billion rupees,earnings estimate by Reuters showed.

Jammu & Kashmir Bank’s profit may jump 59.91 per cent to 956.25 million rupees,it showed.

“Healthy net interest margins on good full-year loan growth and less depreciation on investments would help these bank profits grow,” analysts said.