CONNECT WITH US
Fintech

Fintech

Large private banks may see NIMs dragged down by FCNR deposits in Q2

ET BFSI Fintech logo

Published on

Add as a preferred source on Google
Large private banks may see NIMs dragged down by FCNR deposits in Q2

Large private banks may see NIMs dragged down by FCNR deposits in Q2

NIMs are likely to remain stable or decline marginally quarter on quarter, depending on the quantum of FCNR deposits raised, while lending yields remain stable during the quarter.

Banks are expected to report about 11 per cent year-on-year earnings growth, with NII growth also at 11 per cent. Private banks are expected to post 20 per cent year-on-year earnings growth, while PSU banks are expected to report flat earnings. Non-interest income is expected to decline due to lower treasury income, while lower slippages and higher recoveries should keep credit costs down. Kotak continues to prefer large private banks over mid-tier, regional and small finance banks, citing stronger balance sheets and underwriting discipline.

FCNR deposit mobilisation is likely to be the key factor shaping banks’ second quarter results, with the inflows expected to create a 10-15 basis point quarterly impact on net interest margins ( NIMs ) for large private banks . Banks are expected to report solid loan growth in the quarter, aided by the additional deposits, while asset quality remains stable, to Kotak Institutional Equities said in a report. It expects NII to grow 11 per cent year on year, with overall earnings growth of about 11 per cent. The impact of FCNR deposits will be felt as funding raised at attractive offshore spreads takes time to be deployed through loan growth or used to replace higher-cost liabilities, Kotak Institutional Equities said. For large private banks, the inflows could also dilute reported CASA ratios and create a short-term drag on NIMs.


Source link
Related Topics:Fintech

Disclaimer

We strive to uphold the highest ethical standards in all of our reporting and coverage. We TheMorningPulse.fyi want to be transparent with our readers about any potential conflicts of interest that may arise in our work. It's possible that some of the investors we feature may have connections to other businesses, including competitors or companies we write about. However, we want to assure our readers that this will not have any impact on the integrity or impartiality of our reporting. We are committed to delivering accurate, unbiased news and information to our audience, and we will continue to uphold our ethics and principles in all of our work. Thank you for your trust and support.