Banks to post robust Q3 earnings: Analysts

Banks are expected to show robust earnings in the December quarter on the back of high credit growth and hike in prime lending rates despite borrowings by them to shore up their capital base, say analysts.

This comes ahead of the Q3 results of public and private sector behemoths State Bank of India and ICICI bank on January 23 and January 20 respectively.

Brokerage house Sharekhan expects these factors to drive major banks to post strong earnings for the period though there was sequential margin pressures on a quarterly basis.

"For all banks, excluding the State Bank of India, we expect the net interest income (NII), operating income and profit after tax (PAT) to grow 22.6%, 26.8% and 21.2% respectively on a year-on-year (YoY) basis," Sharekhan said in a banking earnings preview report.

However, some pressure is expected on the margins of banks on a quarter-on-quarter (QoQ) basis as the bulk deposit rates have moved up sharply and many banks have made significant borrowings to meet up with their capital requirements last quarter, the report added.

"Banks are expected to witness strong growth in profits on the back of robust revenues earned in the quarter," Edelweiss Capital banking analyst Vishal Goyal said.

Another brokerage firm Brics Securities forecasts a robust quarterly earnings for the banking sector on the back of strong deposits and higher loan outflow.

"Business growth for the sector continues to remain strong with Q3FY07 system deposits up 20% YoY and loans up 30% YoY (expected). With fee growth continuing to be robust private banks are expected to maintain their 25-30% earnings growth trajectory," BRICS Securities research report said.