FE Editorial : Don’t bank on it
More than concerns on asset quality, though, it was the earnings growth, at just 8% yoy, that was disappointing given it came off the muted base of Q3FY12. The bad news is that profits are unlikely to regain much momentum—Kotak Institutional Equities estimates earnings will grow at a compounded 9% between FY13-FY15. The main reason why profits will grow at a slower pace is because business is expected to be dull with fewer opportunities for banks to lend. Loan growth averaged 14.5% in the December 2012 quarter, but between April and January this year, non-food credit has grown a muted 7%. Although the yoy growth of 16% is far more robust, it’s way below the long-term average of 20%-plus. Since much of the business in
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