21 Mar 2013
Banking
INDIA BANKING: Business growth continues to be moderate with loan growth at
15.4% and deposit growth at 13.1%
RBI released the banking sector business data for fortnight ended 8th March 2013.
Key takeaways:
‐
Loan growth moderated to 15.4% v/s 16.3% YoY as fortnight earlier. In absolute
terms, loans increased by INR548b v/s INR261b a fortnight ago and INR797b a
year ago.
‐
Deposits growth improved to 13.1% v/s 12.7% YoY a fortnight earlier. In
absolute terms, deposits improved INR991b v/s decline of INR98b a fortnight
ago and INR662b a year ago.
‐
YTD (over March 2012), loans in absolute terms increased ~INR4.8t to INR51.8t
whereas deposits grew ~INR5.5t to INR66.6t. In percentage terms YTD loan
loans and deposit growth stood at 10.1% and 9%.
‐
On a fortnightly basis CD ratio declined 34bp to 77.8%. YTD (Feb‐13 over Mar‐
12) CD ratio continues to remain at an elevated level of 87%.
‐
SLR deposits improved INR416b in the previous fortnight. As a result, SLR
improved by 15bp on a fortnightly basis to 27.5%.
Business growth continues to remain moderate; CD ratio at 77.8%; SLR at 27.5%
‐
Loan growth moderated to 15.4% v/s 16.3% YoY as fortnight earlier. However,
deposits growth for the banking system improved to 13.1% v/s 12.7%
YoY
a
fortnight earlier. In absolute terms, loans increased by INR548b v/s INR261b a
fortnight ago and INR797b a year ago.
-
Non‐food credit improved by INR577b v/s INR279b in the previous fortnight.
Non‐food credit growth declined to 15.3% v/s 16% a fortnight earlier. In
absolute terms, deposits improved INR991b v/s decline of INR98b a fortnight
ago. As a result, YTD deposits growth stands at 9% (INR5.5t in absolute terms).
-
On a fortnightly basis, CD ratio moderated to 77.8% v/s 78.1% in previous
fortnight. TTM incremental CD ratio declined to 89.4% v/s 96.7% a fortnight
earlier. YTD (Apr‐Feb 2013) CD ratio stood at 87%.
-
SLR investments improved by INR416b v/s decline of INR341b in previous
fortnight; SLR improved 15bp on a fortnightly basis to 27.5%. YTD, banks
continue to park its excess liquidity in government securities as a result of which
SLR remains higher than 26.1% as of Mar‐12.
In Mar‐12 alone, loan and deposit in absolute terms increased by INR2.2t (28%
of the incremental loans in FY12) and INR2.3t (25% of the incremental deposits
in FY12). Hence, to achieve 16% loan and 15% deposits growth for FY13, in
remaining of 4QFY13, banks will have to grow loans by INR2.8t (37% of
incremental growth for FY13) and deposits by INR3.7t (40% of incremental
growth for FY13) – a big challenge.
1

Banking
Loan growth moderates on a fortnightly basis…
…while deposit growth improves
CD ratio remains elevated
YTD loans growth remains moderate (INR b)…
Deposit growth improved over last three quarters (INR b)
Excess liquidity being parked in G‐Sec (%)
Financials sector view & strategy:
‐
The government of India's (GoI) concrete steps towards reforms in 2HCY12
brought rays of hope for Financials. Our economist believes that the changed
growth inflation outlook and stance is a harbinger of more rate cuts to come
(expected 50bp more in CY13) albeit in a more calibrated fashion. In its mid‐
term monetary policy, RBI cut the policy rates by 25bp and also announced
further OMO of INR100b to be auctioned on March 22, 2013, taking the FY13
OMO to INR1.6t, and closer to our estimate of INR1.8t while keeping the SLR
and CRR unchanged.
21 Mar 2013
2

Banking
‐
Expected improvement in business climate, economic growth and easing of
interest rate in the system, will help assuage asset quality concerns and would
be viewed favorably for financials (especially for state‐owned banks).
Our top picks:
state‐owned banks
‐
SBIN, PNB, CBK, UNBK
and
OBC;
private
sector banks ‐ ICICIBC, AXSB and YES; NBFCs – POWF, SHTF and LICHF.
21 Mar 2013
3

Banking
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21 Mar 2013
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