Initial business updates released by IndusInd Bank, Federal Bank, Karur Vysya Bank and Dhanlaxmi Bank indicate that the banking sector may see a healthy loan growth in the second quarter. These private lenders have witnessed loan growth of 13-21%, sparking the hopes that other banks may also witness similar growth in the second quarter.
Among the four lenders, IndusInd Bank has registered highest growth as its net advances jumped 21% year-on-year to Rs 3.14 trillion as of September 30, 2023 from Rs 2.60 trillion in September 2022. The statement sent to the Bombay Stock Exchange showed that the deposits of the bank jumped 14% to Rs 3.59 trillion in the second quarter from Rs 3.15 trillion.
“Loan growth will not be a problem for the banks and they are expected to witness the same loan growth which was seen last in the first quarter of this financial year. However, the net interest margin of the lenders may come under pressure because of the repricing of deposits,” Yuvraj Choudhary, research analyst, Anand Rathi Institutional Equities told FE.
However, experts caution that high loan and deposit growth does not necessarily mean higher profit for banks. The trend in bad loans or non- performing assets (NPAs) will be a key factor impacting the profitability of banks. Also banks have raised term deposits rates aggressively in the past two quarters, which will affect their cost of funds.
The business update shared by the Federal Bank showed that gross advances surging 20% to Rs 1.9 trillion at the end of second quarter compared to Rs 1.6 trillion in the same quarter of last year. Similarly, its deposits grew 23% to Rs 2.3 trillion at the end of second quarter.
Karur Vysya Bank registered 15.3% growth in advances in the second quarter of the current financial year. Bank’s advances reached Rs 70,446 crore as of September 30, 2023. Dhanlaxmi Bank Gross advances grew 13.2% to Rs 10,312 crore at the end of second quarter as against Rs 9,109 crore in the corresponding quarter of the base fiscal.