The Indian banking sector is showing strong resilience and flexibility as it deals with a changing economy. Banks are seeing steady growth in loans, deposits, and profits. While there are some challenges, especially in the areas of unsecured loans and microfinance, the overall future looks bright due to strong fundamentals and good management.
For Financial Year 2025, credit is expected to grow about 11%, improving to approximately 12.5% in FY26. This shows that people are still looking for loans across important sectors. On the deposit side, growth is strong at 11.5% as of December 2024. This because banks are competing hard for customers and coming up with smart ways to attract more funds.
Public sector banks (PSBs) are performing exceptionally well, with earnings expected to grow by 36.3% year-over-year in the third quarter of FY25. They are successfully managing their recoveries, keeping credit costs low, and controlling their expenses.
Private banks like ICICI Bank, HDFC Bank, and Federal Bank are doing well too, showing a healthy increase in their earnings and loan growth despite facing some pressure in the unsecured loan and microfinance markets. Importantly, the quality of assets in the banking sector remains stable, with manageable slippages.
The overall operating profit for banks is expected to rise by 13.2% year-over-year in the third quarter of FY25, indicating a strong financial performance. Technology is helping banks modernize, opening up new opportunities. Fintech companies, such as Paytm, are making strides, with Paytm expected to break even in adjusted EBITDA by the fourth quarter of FY25.
As the Indian economy grows, the banking sector is a key player in maintaining stability. Large private banks and public sector banks are well prepared for current and future challenges. With solid growth in loans and deposits, stable asset quality, and ongoing technological improvements, the banking sector is likely to continue flourishing.
ICICI Bank: Buy| Target Rs 1,550| Current Price Rs 1,290| Potential Gain 20%
ICICI Bank is expected to do really well, thanks to healthy growth in loans, strong asset quality, and leading return ratios. With plenty of new deposits coming in and a healthy loan-to-deposit ratio, ICICI Bank is set for exciting growth. The bank’s asset quality looks good, thanks to strong standards and a high contingency buffer of about 1% of loans. We believe ICICI Bank will see averages of 15% and 12% growth in two key profit measures from FY25 to FY27, leading to returns of 2.1% and 16.7% by FY27.
SBI: Buy| Target Rs 1,000| Current Price Rs 801| Potential Gain 24%
State Bank of India (SBI) plans to open 500 new branches in FY25 and invest $1.5 billion in international operations, which will boost both domestic and global reach. Credit is expected to grow between 14% and 15%, and deposits should surpass 10% as the bank focuses on mobilizing more deposits. SBI is also reporting strong risk management and potential for growth in FY25 and beyond.
(The information provided here does not reflect the views of thell.news)
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