Banks Q2 earnings to rise by 10pc

Mumbai: Banks will report a moderate growth of around 10 percent in the earnings in the second quarter due to higher provisioning by state-run banks and slowdown in credit growth, analysts say.

However, in spite of the repeated rate hikes, the lenders who will start reporting their numbers for the September quarter from this week will not have a slip in margins. As the public sector banks complete the transition to a system-based non-performing assets recognition, the additional provisioning will hurt their profits, they say. "State-owned banks will report higher delinquencies as they will likely complete their stringent non-performing loans recognition platform in the reporting quarter especially for small-ticket loans, whereas we find limited concern for private banks on this count," Kotak Institutional Equities says in a note.

The report says it expects earnings to grow 10 percent for the overall system, with PSU banks showing a 3 percent growth and smaller private banks a higher growth, to the tune of 27 percent.Analysts at the brokerage Sharekhan peg the earnings growth at 10.6 percent for the system, pulled down by rising interest rates, slowing credit expansion and growing concerns over asset quality."In Q2, the slower credit growth, increase in the NPA provisions and the marked-to-market provisions on investment book are expected to adversely affect the growth in earnings," it says.