Banks may post higher interest income, margins; management commentary will be key
Banks are expected to report strong operating growth in the September quarter on the back of healthy margins and a drop in loan loss provisioning, analysts said. The sharp rise in policy rates, by 190 basis points, since May, and its transmission, will lead to higher net interest income, and consequently, better net interest margin (NIM). Unlike the previous quarter, all banks are likely to report strong loan growth. It will be more diversified than the earlier trend of being skewed to a few sectors such as retail. “As compared to the previous quarter, we should see NIMs start improving as the loans linked to MCLR/EBLR have started to reprice reflecting the new policy rates. In addition, unlike the previous quarter, we don’t have concerns about treasury losses in this quarter as overall yields have been marginally lower than in 1QFY23," said analysts at Kotak Institutional Equities.