Banking sector net profit exceeds ₹3 trillion in FY24; HDFC, Axis, BoB top choices.

Synopsis : Indian banks report robust earnings growth in Q4 FY24, with net profit exceeding ₹3 trillion. PM Modi lauds the turnaround, foreseeing improved credit access. Market outlook favors state-run banks' profit growth. IIFL Securities recommends Axis, HDFC, IndusInd, and Bank of Baroda.

Indian banks have witnessed robust earnings growth in Q4 FY24, driven by healthy loan expansion. Listed banks saw a 39% YoY increase in net profit, surpassing Rs 3 trillion for the first time. PM Modi hailed this achievement, anticipating enhanced credit accessibility for the underprivileged.

Private lenders recorded a net profit of Rs 1.78 trillion, while PSU banks reported Rs 1.41 trillion in FY24. Market forecasts predict a mid-single-digit rise in net profit for state-run banks in FY25, contrasting with stable estimates for private banks.

Despite a 9% core Pre-Provisions Operating Profit (PPOP) and 21% YoY PAT growth in Q4FY24, some banks experienced a decline in loan market share and corporate loans due to weakened pricing power. IIFL Securities anticipates a slowdown in system loan growth to 13% in FY25, with private banks expanding into Sub-Urban & Rural (SURU) areas at the expense of PSU banks.

Deposit competition remains intense, with rising TD rates and liquidity buffer drawdowns affecting NIM outcomes. Assuming no rate cuts in FY25, a residual re-pricing framework suggests further spreads decline for select banks.

Agri, MSME, and MFI slippages increased slightly, but overall credit costs remain subdued. IIFL Securities recommends Axis Bank, HDFC Bank, IndusInd Bank among private banks, and Bank of Baroda among PSU banks.

IIFL Securities' top picks in the banking sector are:

• Axis Bank: Buy, Target Price: Rs 1,290
• HDFC Bank: Buy, Target Price: Rs 1,760
• IndusInd Bank: Buy, Target Price: Rs 1,680
• Bank of Baroda: Buy, Target Price: Rs 300

Disclaimer: The opinions and suggestions provided above are from individual analysts or brokerage firms. We encourage investors to consult certified experts before making investment choices.

Related Questions

1. What drove the robust earnings growth of Indian banks in Q4 FY24?

The robust earnings growth of Indian banks in Q4 FY24 was primarily driven by healthy loan expansion.

2. How did the net profit of listed banks perform in Q4 FY24?

Listed banks saw a 39% YoY increase in net profit in Q4 FY24, surpassing Rs 3 trillion for the first time.

3. What are the market forecasts for net profit growth of state-run banks in FY25?

Market forecasts predict a mid-single-digit rise in net profit for state-run banks in FY25.

4. How did deposit competition affect NIM outcomes for Indian banks?

Deposit competition remains intense, affecting Net Interest Margin (NIM) outcomes due to rising TD rates and liquidity buffer drawdowns.

5. Which banks are recommended by IIFL Securities as top picks in the banking sector?

IIFL Securities recommends Axis Bank, HDFC Bank, IndusInd Bank among private banks, and Bank of Baroda among PSU banks as top picks in the banking sector.