Mumbai, April 21: Private banks are likely to report better fourth-quarter earnings than their public sector peers, though the chances of the state-owned lenders reporting a further deterioration in non-performing assets seem low.
HDFC Bank, the country’s second-largest private bank, will announce its fourth-quarter results tomorrow, followed by ICICI Bank and Axis Bank on Friday.
The results and the outlook will be significant as banking stocks have outperformed the broader indices during the quarter, with some of the public sector lenders witnessing a smart uptick.
Analysts believe private lenders will continue to do better than the nationalised banks. They, however, held out hopes that with a likely turnaround in the domestic economy, PSU banks, which had been hit by rising bad loans over the past many quarters, might see the pace of fresh NPAs slowing down.
“Overall, we expect private banks to continue to report better quality of earnings than their PSU counterparts, though incremental deterioration in PSU banks is expected to recede,” says Hatim Broachwala of Karvy Securities.
Mid-sized lender IndusInd was the first among the banking pack to declare its results last week. It reported better-than-expected numbers with net profit rising nearly 29 per cent, driven by a strong loan growth and a jump in other income.
HDFC Bank, which till the first quarter of 2013-14 had consistently posted a growth of 30 per cent in its net profit, is expected to see a 23-26 per cent jump in earnings in the fourth quarter.
For many in the markets, however, the focus will be on the movement of NPAs, particularly in public sector banks.
The banking industry has seen a rise in bad loans over the past few years. Even in the third quarter, the gross aggregate slippage in loans remained high though it was lower than the corresponding period of last year.
“In the near term, we expect slippages to plateau. However, on a positive note, recoveries/upgrades are expected to witness a spurt aided by the recent pick-up in sale of assets to asset reconstruction companies. Overall, we expect net slippages to trend gradually lower here on,” a note from Angel Broking said.