Mumbai, Sept. 30 (PTI): Banks are likely to report a 14.5 per cent growth in second-quarter earnings despite rising bad assets and debt recast, according to a report by brokerage firm Kotak Institutional Equities.
The report, however, says growth in core net interest income will slow down to 13 per cent, with state-run banks logging in at 9 per cent and private lenders at a much faster clip of 22 per cent.
The report also notes that a rise in treasury incomes will lead to an overall 11 per cent rise in non-interest income for the system, but the core fee income will be muted as the corporate activity remains dull.
The brokerage expects the net interest margins to remain under pressure. The full impact of the base rate cuts of May 2012 will also get reflected in the results, it notes.
Kotak has a negative outlook on asset quality even though there has been some silver lining such as the recent Rs 1.9 trillion SEB (state electricity board) loan recast.
“Retail portfolios should see marginal rise in stress, however, the corporate portfolio, especially in the SME and mid-corporate segments are expected to report higher stress. We believe stress in the infrastructure value chain should begin to be reflected in the current quarter; exposure to other segments such as textiles, iron and steel has not yet provided respite,” says the report.