Private banks net profit grows 23.8% YoY in Q3 FY24, moderates sequentially.

Listed private sector banks posted a strong 23.8% YoY net profit growth, reaching US$ 5.2 billion (Rs. 43,543 crore) in Q3 FY24, driven by high credit offtake and cost reductions. However, sequential profit growth slowed to 1.8% from Q2 FY24 due to the impact of fund costs on net interest income (NII).

NII expanded by 16.3% YoY to US$ 10.8 billion (Rs. 89,878 crore) in Q3 FY24, reflecting benefits from loan repricing and higher-rate credit disbursement. Banks, prioritizing asset quality amidst competition, limited room for lending rate increases, noted Sanjay Agarwal of CareEdge. RBI data indicated a rise in weighted average deposit rates for private banks from 5.89% (Dec '22) to 6.76% (Nov '23). However, the increase in weighted average lending rates on term loans was modest, from 10.48% to 10.64%.

Net interest margins (NIM) faced pressure; HDFC Bank's NIM declined to 3.4% in Q3 FY24. Jefferies anticipates NIM improvement with increased retail deposit mobilization and lending. ICICI Bank's NIM declined to 4.43% in Q3 FY24, with Standard and Poor's forecasting a further 10 bps decline in the next quarter due to potential deposit cost increases.

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