Led by state-run banks which are set to report increased strains on asset quality, the banking sector is set to see net profits decline by 11% in Q1 as compared to the last quarter of 2011-12, says a StanChart Securities report.
However, the profits could post a 43% rise year on year, it said.
As far as state-run banks are concerned, they will see increased strains on their asset quality with more loan recasts pulling down their first quarter profit by 14% quarter on quarter (QoQ).
They could, however, see a 53% rise in post-tax profit on an annualised basis, the report said.
With a comparatively better showing by the private sector banks, the report says overall earnings for banks will see a likely decline of 11% quarter on quarter (QoQ) but an annualised growth of 43%.
The report further says though private sector banks remain better placed in terms of overall asset quality, they too will see stress on their assets with the overall profit likely to decline by 5% QoQ, though a growth of 30% year on year (YoY).
"We expect net profit for state banks to grow 53% year-on-year (primarily due to the low base effect for SBI) and decline 14% quarter on quarter in the first quarter of the fiscal.
"We expect net profit for private banks to grow 30% YoY and decline 5% QoQ. Overall earnings for banks will likely grow 43% YoY and decline 11% QoQ," the report titled 'India Financial-Q1FY13-Stress loans in focus again' prepared by Mahrukh Adajania and Rounak Agarwal of StanChart Securities said here today.
The report attributes poor number to flat loan growth, sharp growth in overseas loans due to rupee fall, high trading gains and/or write-back of investment depreciation due to volatility in G-secs and corporate bond yields, pressure on core fee income due to weak corporate activity, among other factors.