Indian banks' loan growth feared to remain muted at 12-13%

Blame it on crumbling corporate loan demand.

In India banks, it has been noted that normalisation in treasury income and lower MTM investment provision should support earnings.

According to a research note from Maybank Kim Eng, it expects earnings of PSBs to grow sharply at 45% YoY led by PNB at 173% YoY and SBIN at 42% YoY.

Meanwhile, for private banks, EPS growth will remain steady at 20% YoY. Further, the report estimated AXSB will report 26% increase in EPS (contingent provision in 2QFY14 of INR1.5b).

Here’s more from Maybank Kim Eng:

Loan growth for 2Q will remain muted at 12-13% as corporate loan demand is weak.

We expect gradual pickup in 2H acceleration in large corporate loans and in loans to the auto, housing and other consumer segments will support growth.

Margins should remain stable due to lower volatility in rates (3M CD increased just 6bps to 8.65% in 2QFY15) and unchanged base rates.

We expect stable asset quality trends and GNPL ratio for our coverage at 3.1% (2QFY14:3.2%). Restructuring should come down, as evident from CDR data. Slippages from restructured accounts will pick up.