Stable margins, stronger loan growth and better asset quality will help private sector banks outperform public sector banks (PSBs) yet again in the third quarter, according to analysts.
For public sector banks, an additional provisioning of 0.75 per cent, as directed by the Reserve bank of India (RBI), is likely to impact the earnings this quarter, say analysts.
A report by Motilal Oswal said that over the past two years, public sector banks have underperformed significantly, led by sharp increase in slippages and restructured assets and deterioration in operating performance led by fall in margins. With expectation of economic recovery and monetary easing in the financial year 2014, we expect the stress in the balance sheet to peak out in first half of the calendar year 2013.
As far as interest income is concerned, public sector banks will lag behind private sector banks by about 7-8 per cent with a marginal compression carried forward from the second quarter,said Vaibhav Agrawal, Senior Analyst with Angel Broking.
Private sector banks are likely to register an earnings growth of about 20-25 per cent during the third quarter, while for public sector ones it may stay around 16 per cent, analysts said.
Vishal Narnolia, Analyst with SMC Global Securities Ltd, said, “On the asset quality side, we do see a decline in the levels of restructured and non-performing assets on a quarter-on-quarter basis with the steps taken by the banks and Government. While, major stress levels continue in the infrastructure, metals (iron and steel), textile and to some extent the power sector.”
According to Agrawal, “During the third quarter, overall restructured assets are likely to remain flat. However, some improvement on the asset quality side could be a positive indicator for the fourth quarter.”
The banking sector results will start with IndusInd bank reporting its third quarter earnings today.