Sector Update
Update | Financials
| 29 March 2019
Credit growth remains healthy
Retail/SME loan growth strong; industrial growth showing signs of recovery
The share of retail loans
increased to ~26% of the total
For the fortnight ended 15 Mar’19, systemic loan growth remained strong at 14.5%
YoY (v/s 14.4% for last fortnight) with the outstanding credit base reaching INR95.5t.
Credit growth was driven by both retail and the services’ segments. Also, growth in
the industrial segment improved to 5.6% YoY (v/s 1.0% YoY in Apr’18), clearly showing
signs of a recovery. Banks’ lending to NBFCs has also slightly improved (3.2% MoM).
We expect loan growth to remain steady, led by (a) continued strength in the retail
segment, (b) portfolio buyouts from NBFCs due to continued funding pressure, (c) the
government’s recent capital infusion in PSU banks, and (d) the RBI’s decision to bring
six banks out of PCA.
Moreover, with better capacity utilization in the system, the capex cycle is also
improving, which should further support credit growth. We continue to believe that
private banks’ loan growth will remain healthy at ~20% YoY, driven by retail and the
SME segments. Moreover, private banks should continue gaining market share not
only from PSBs, but also from NBFCs.
Deposit growth for the fortnight stood at 10.0% (v/s 9.8% the last fortnight), mainly
due to a benign base. The outstanding deposit base reached INR122.3t. System CD
ratio stood at 78.1% (30bp higher than last fortnight), while the investment-to-deposit
ratio was at 27.8%.
Within retail loans, Credit
cards growth was the highest
at 27% YoY
Retail and services – key engines for growth
The retail (+17% YoY) and services’ (+24% YoY) sectors remained the key drivers of
loan growth as at Feb’19. Also, industrial growth picked up to 5.6% YoY (from 1.0%
in Apr’18). The share of retail in total systemic credit improved to 26% v/s 20% four
years ago. Retail traction for banks was driven by strong growth in credit cards
(+27% YoY), housing loans (+19% YoY) and other personal loans (+22% YoY). Further,
portfolio buyouts from NBFCs could have also contributed to the growth.
Lending to NBFCs improves to +3.2% MoM
Banks’ exposure to NBFCs grew at 47.5% YoY (+3.2% MoM) to 6.9% of overall credit
in Feb’19 (v/s 7.0% in Dec’18). Lending to NBFCs increased strongly until Sep’18, but
slowed thereafter due to liquidity issues (growth slowed to 4.4% QoQ in 3QFY19 v/s
18.4% QoQ in 2QFY19). Many banks in their recent result announcements
highlighted a cautious stance towards lending to select NBFCs, while confidently
continuing lending to strong parentage/better rated NBFCs.
Maintaining preference for AXSB, ICICIBC and HDFCB
The outlook for corporate banks is improving, given the moderation in slippages,
reduction in total stressed loans and improving profitability. We believe that revival
in credit growth, along with improved pricing power should help drive faster NII
growth. Among corporate lenders, we prefer AXSB and ICICIBC – we expect their
earnings to accelerate significantly from FY20 onwards.
Within our coverage
universe, we maintain our preference for ICICIBC, AXSB, and HDFCB.
Research Analyst: Nitin Aggarwal
(; +91 22 6129 1542
Parth Gutka
(; +91 22 6129 1567
Alpesh Mehta
(; +91 22 6129 1526
Himanshu Taluja
(; +91 22 6129 1544
Yash Agarwal
(; +91 22 6129 1571
Investors are advised to refer through important disclosures made at the last page of the Research Report.
29 March 2019
Motilal Oswal research is available on, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Sector Update | Financials
Exhibit 1: System loan/deposit growth picked up to 14.5%/10.0% for the fortnight ended
15 Mar’19
Loan growth (%)
Deposit growth (%)
Source: Company, MOFSL
Credit to industrial/agri
picked up to 5.6%/7.5%
Exhibit 2: System credit — primarily driven by services and retail
Non-food Cr
Growth in retail & services
sector remained robust
Source: Company, MOFSL
Exhibit 3: Services and retail formed 53% of system credit as at Feb’19 v/s 44% in Feb’16
Source: Company, MOFSL
29 March 2019
 Motilal Oswal Financial Services
Sector Update | Financials
Exhibit 4: Within retail loans, credit cards grew the highest at 27% YoY
Personal loans (retail)
Cr Card
Source: Company, MOFSL
Exhibit 5: Trend in composition of retail loans
Cr Card
Vehi Loans
28% 29% 28% 30% 29% 29% 29% 30% 30% 31% 30% 30% 30% 30% 30% 31% 31% 31% 31% 31% 31%
10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%
3% 3% 3% 3% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4%
53% 52% 53% 52% 52% 52% 52% 52% 52% 51% 51% 52% 52% 52% 52% 52% 52% 52% 52% 52% 52%
Source: Company, MOFSL
29 March 2019
 Motilal Oswal Financial Services
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
< - 10%
> - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
Sector Update | Financials
* In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL*
is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services,
Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of
which are available on MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and BSE Limited (BSE), Multi Commodity
Exchange of India (MCX) & National Commodity & Derivatives Exchange Ltd. (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) & National Securities Depository Limited (NSDL) and is
member of Association of Mutual Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are available on the website at
MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have actual/beneficial ownership of 1% or more securities in the subject
company at the end of the month immediately preceding the date of publication of the Research Report. MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short
position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in
the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and
opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even though
there might exist an inherent conflict of interest in some of the stocks mentioned in the research report. Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may
have received any compensation from the subject company in the past 12 months.
In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:
managed or co-managed public offering of securities from subject company of this research report,
received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,
received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
Subject Company may have been a client of MOSL or its associates during twelve months preceding the date of distribution of the research report.
MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL has incorporated a Disclosure of Interest Statement in
this document. This should, however, not be treated as endorsement of the views expressed in the report. MOSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result,
the recipients of this report should be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or
brokerage service transactions.
Terms & Conditions:
This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part
or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report
is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied,
is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to
buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as customers by
virtue of their receiving this report.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the
specific recommendations and views expressed by research analyst(s) in this report.
Disclosure of Interest Statement
Analyst ownership of the stock
Companies where there is interest
A graph of daily closing prices of securities is available at, Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOSL or
its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have
expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject
MOSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities
and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong)
Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only
available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from
registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered
investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption
under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional
Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional
investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule
15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S.,
MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of
this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject
to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services license and an exempt financial adviser in Singapore,
as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore.
Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of
whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such
Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced
in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in
this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of
independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document
(including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including
those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy,
completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval.
MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform
investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this
into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and
the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such
distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all
jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall
be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. The person accessing this information specifically agrees
to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSL
or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; Correspondence Address: Palm Spring Centre, 2nd Floor, Palm
Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:, Contact No.:022-30801085.
Registration details of group entities: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser:
INA000007100.Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409)
offers wealth management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate
products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Bench. The existing registration no(s) of
MOSL would be used until receipt of new MOFSL registration numbers.
29 March 2019