Accordingly, the brokerage house expects its coverage universe of 23 lenders to report 51 per cent YoY growth during the period under review.
This trend, the report said will come largely on the back of expected normalisation of provisions.
“The pace of collections and recoveries continues to improve, which, concurrent with normalised economic activity, is likely to moderate the stressed pool,” the report said.
“Disbursements are likely to witness healthy growth, driven by seasonal pick-up in retail loans as large corporate Capex remains elusive.”
As per the report, the revival in business momentum is likely to drive a 10.4 per cent YoY loan growth for the brokerage house’s coverage universe, with large private banks and large NBFCs (BAF) continuing to clock market share gains.
“The third wave of the pandemic is unlikely to impact Q3 earnings except in underlying sectors like travel and tourism that are already under stress.”
“However, we expect most lenders to maintain a surplus provisioning buffer for potential asset quality issues. We tweak our FY22E-FY24E forecasts for select lenders to factor in lower credit growth and marginally higher credit costs.”
Besides, HDFC Securities continue to prefer large banks with strong balance sheets and formidable deposit franchises.
Furthermore, it cited that business momentum continues to gather pace.
“In a quarter relatively unaffected by the pandemic and near-normal resumption of economic activity, we expect to see strong sequential growth in disbursements, particularly in retail and SME segments, riding on seasonal and pent- up demand.”
“Provisional filings suggest that banks within our coverage universe continue to gain market share as reflected in loan growth at 12 per cent YoY compared to system-wide YoY credit growth at 7 per cent.”
At present, the brokerage house has 23 lenders in its coverage universe including ICICI Bank, SBI, Bajaj Finance, SBI Cards, and Axis Bank.