X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Banking: Any positive signals? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 8, 2001

    Banking: Any positive signals?

    The non-food credit of banks finally showed some sign of improvements for the September month. The rise of Rs 35 bn YoY was the largest increase during the current fiscal year, indicating some positive signs in the industrial growth rates.

    However, year to date (April to September 21), the incremental credit has risen by just Rs 97 bn compared with Rs 251 bn increase during the corresponding period of previous year. The total credit has also witnessed a YoY fall of 29% to Rs 619 bn.

    Meanwhile, the aggregate deposits of banks increased by 21% to Rs 759 bn year to date. This is despite softer interest rates. Uncertain environment has contributed to this rise. As a result of sluggish growth in credit to industrial sectors and less investment opportunities in equity market, banks are flooded with excess funds, which are invested in debt markets.

    Since the beginning of the current fiscal till September 21, 01, investments of banks surged by 85% to Rs 816 bn. This is much higher than the figure of total bank credit (Rs 619 bn). Banks are increasingly shifting their focus to investment income with buoyancy in the debt markets. Favourable interest rate scenario is likely to keep gilt prices firm. This would result in appreciation in the banks investment portfolio and a consequent rise in investment income.

    Banks in general are expected to report dismal topline growth in the September quarter due to lack of credit demand. However, an extraordinary rise in investment income is expected to compensate for a decline in core interest income. Operating margins could however remain firm on the back of cost cutting exercise by most public sector banks (PSBs).

    Also, a satisfactory growth in other income is expected to maintain the bottomline of banking companies. Both public and private banks are now concentrating on income from non-fund based banking activities such as fees and commission, forex and money-market trading income. Other income of the private banking sector jumped by 117% in the June quarter YoY and the PSBís reported a 25% rise in other income. This pushed the earnings growth of the entire banking sector by 27% in the June quarter.

    If the economic environment improves in the second half of the current fiscal (led by lower interest rates), banks could tap the investment opportunities in the industrial sector. However, they are wary of lending to long-term projects, as the risk of assets becoming non-performing is high. This means that there would be more supply of funds for working capital loans and in a competitive scenario it would pressurize interest spread of banks.

     

     

    Equitymaster requests your view! Post a comment on "Banking: Any positive signals?". Click here!

      
     

    More Views on News

    IDFC Bank: Strong Trading Income Shields Credit Slowdown (Quarterly Results Update - Detailed)

    Aug 10, 2017

    IDFC Bank is taking steps to address contracting NIMs and successfully transition in to a retail bank.

    ICICI Bank: Loan Slippages Trending Downwards (Quarterly Results Update - Detailed)

    Aug 10, 2017

    Asset quality will be the key thing to watch out for going forward.

    Axis Bank: Outside Watchlist Slippages a Big Worry (Quarterly Results Update - Detailed)

    Jul 31, 2017

    Almost 74% of the watchlist as provided by the bank of Rs 226 billion in FY16 has turned into non-performing assets.

    Should You Take SBI Chief's Advice and Load up on SBI Shares? (The 5 Minute Wrapup)

    Jul 6, 2017

    Does the stock score on the value versus price equation?

    AU Small Finance Bank Ltd. (IPO)

    Jun 27, 2017

    Should one subscribe to the IPO of AU Small Finance Bank Ltd?

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE BANKEX


    Aug 17, 2017 (Close)

    S&P BSE BANKEX 5-YR ANALYSIS

    COMPARE COMPANY

    MARKET STATS