Non-banking financial companies (NBFCs) are likely to post earnings growth of between 20% and 84% Y-o-Y during the July-September quarter, according to Kotak Institutional Equities.
NBFCs are expected to benefit from falling borrowing costs even as operational trends remain unchanged during the quarter, the brokerage said.
“We do not find significant change in NIM (net interest margin) q-o-q (quarter-on-quarter) (baring seasonal variations) as gradual reprising down of liabilities is getting passed on as well,” Kotak Institutional Equities observed. “A sharp decline in bond yields is incrementally benefitted the large AAA-rated NBFC and small players; the impact of the same should be visible in 2H.”
A challenge NBFCs might have faced during the quarter is low demand for housing loans. “The overall outlook on housing remains modest; most investment demand for properties is now moving to financial savings. Consumption-demand has picked up in select pockets,” the brokerage said.
KIE expects Bajaj Finance and Bharat Financial Inclusion to record steady growth in loan books. Cholamandalam Investment and Finance is also expected to perform well with expanding NIM and lower credit costs.
Morgan Stanley believes NBFCs may have a strong quarter, with a good monsoon supporting gains from a decline in borrowing rates.
Morgan Stanley has raised its target prices for shares of Shriram Transport Fin and M&M Financial Services on hopes of better earnings.