The corporate earnings for the fourth quarter of fiscal 2022 remained healthy despite the global and domestic headwinds. India Inc. faced challenges from the east-European geopolitical crisis, high raw material costs, jump in energy prices, monetary tightening by central banks, among others during the quarter.
India Inc. witnessed a wide divergence in earnings between sectors amid these disruptions. The soaring raw material prices directly impacted the financials of automobile, consumer staples and durables, cement and chemical companies.
The corporate earnings in Q4FY22 were mostly driven by Banking, Financial Services, and Insurance sector (BFSI), Oil & Gas and Metal sectors. The BFSI sector steered more than half of the incremental growth led by improvement in asset quality and revival in credit growth.
The banking sector’s performance remained strong for the quarter with continued improvement in asset quality coupled with moderation in slippages and witnessing decent loan growth. Net earnings of the sector were led by private banks and small finance banks, while state-run lenders reported flattish earnings sequentially.
Credit Costs: Credit costs improved for most banks. Net interest margins remained divergent as large banks posted flattish growth, while mid and small-sized banks reported sequential improvement.
Net interest income (NII): Net interest income growth across banks was mixed, while muted treasury gains and a rise in operating expenses hurt pre-provisions operating profit growth. However, overall earnings remained buoyant in the March quarter supported by a continuous decline in provisions.
Loan Growth: Loan growth remained higher for the overall banking sector. Aggregate loan growth was 13% YoY, while 6% QoQ. Private banks led the loan growth with 17% YoY and 7% QoQ). Public Sector Banks’ (PSB) reported loan growth of 11% YoY and 2-7% QoQ.
Asset Quality: Most private banks witnessed a sequential decline in slippages leading to the gross non-performing assets (GNPA) decreasing in the range of 10–62 bps. The provision coverage ratio (PCR) of private lenders rose in the range of 66–80%.
For the PSU Banks, operating performance improved with a healthy pickup in net interest income, fee income along with lower provisions.
Margins declined, while slippages rose. However, GNPA ratios for PSU lenders improved by 50-110 bps on the back of healthy recoveries.
Deposit Growth: Banks reported deposit growth of around 11 YoY and 5% on a sequential basis. Deposit growth was also led by private banks with around 15% YoY and 6% QoQ growth. PSBs reported deposits growth of around 8% YoY and 5% QoQ.
Take a look at the Q4 performance of top banks:
|Q4FY22 (Rs Crore)||QoQ||YoY||Q4FY22
The largest private sector lender HDFC Bank reported a standalone net profit of Rs 10,055.2 crore in the fourth quarter of fiscal 2022, registering a rise of 22.8% from Rs 8,186.5 crore in the year-ago period.
Net Interest Income (NII) during the quarter increased 10.2% to Rs 18,872.7 crore from Rs 17,120.2 crore, YoY, while NIMs stood at 4%.
HDFC Bank’s total advances rose 20.8%. Asset quality improved sequentially for the quarter as the Gross NPA decreased to 1.17% of gross advances from 1.26% and Net NPA declined to 0.32% of net advances.
ICICI Bank’s standalone net profit increased 59.42% year-on-year to Rs 7,018.71 crore in Q4FY22. Net interest income grew 21% to Rs 12,605 crore from Rs 10,431 crore, a year ago. NIM was at 4%.
The private lender reported improvement in asset quality. Gross NPA ratio was at 3.60% as compared to 4.13% in the previous quarter and net NPA ratio was at 0.76% versus 0.85% QoQ.
ICICI Bank’s total advances during the quarter registered a growth of 17% YoY to Rs 859,020 crore, while its total deposits grew 14% YoY to Rs 1,064,572 crore.
Axis Bank posted a net profit of Rs 4,118 crore in Q4FY22, a rise of 54% from Rs 2,677 crore in the same quarter last year. Its NII grew 17% YoY to Rs 8,819 crore, while NIM was at 3.49%.
Gross NPA ratio for the quarter declined to 2.82% of total advances from 3.17% and Net NPA ratio fell 0.73% from 0.91%, QoQ.
The bank’s loan growth was at 15.2% YoY and 6.4% QoQ, while its deposits growth was 17.7% YoY and 6.5 QoQ.
State Bank of India
State Bank of India (SBI), the country’s largest state-run lender reported its highest quarterly standalone net profit of Rs 9,113.53 crore during the quarter ended March 2022, registering a 41.2% YoY growth.
On the asset quality front, SBI’s gross NPA ratio decreased to 3.97% of the total assets from 4.50% sequentially, while net NPA ratio declined to 1.02% from 1.34%, QoQ.
SBI’s total deposits grew at 10.06%, while domestic advances growth stood at 10.27% YoY.
Going ahead, the earnings of the banking sector is likely to remain resilient as echoed in their management commentary. However, aggressively interest rate hikes amid high inflation may impact the recovery in demand. As per market experts, lenders with CASA mix and healthy mix of floating loans are likely to be well-positioned