MUMBAI India's mid cap lenders are likely to post a muted net profit growth in the July-September quarter owing to a sluggish increase in loans and lower treasury gains from government bonds, analysts said.
Indian Overseas Bank could see profits slip marginally, while Allahabad Bank could be an exception as it is likely to offset a moderate net interest income through gains in fees and commissions.
Despite a lower net interest income growth, lenders could hold on to, or improve, net interest margins sequentially as most high-cost deposits have been re-priced at lower rates in the quarter, said Ananda Bhowmick, analyst, Fitch Ratings.
"By and large the results are expected to be modest as treasury profits were not much to support growth," Bhowmick said.
Higher bond yields in July-September quarter of over 50 basis points impacted treasury gains, offsetting dependence of banks on non-core income in a period of sluggish loan growth.
Economic downturn has crimped Indian banks' loan growth that slowed from around 27 percent in December 2008 to 12.6 percent in September 2009, even as deposit growth remained around 20 percent, central bank data showed.
State-run banks completed a large part of their loan restructuring and significant negative surprises on slippages are not expected, Alpesh Mehta, analyst at Motilal Oswal, in his research report.
The asset quality trends are likely to remain stable, according to a Kotak Institutional Equities research report.
"We expect retail non-performing loans to start showing better trends," it said.
Although sanctions from state-owned banks were up 50 percent from October 2008 to March 2009, offtake was low because of lack of investments by industries, according to M.V. Nair, chief of Indian Banks Association and Union Bank of India.
Indian firms had postponed capital investments following the economic downturn, but stimulus spending, festivals and signs of strengthening demand are expected to boost loan demand in the December quarter.
"With industrial output picking up, we expect credit growth to rise in the near future," Nair said.
India's industrial output rose 10.4 percent in August from a year earlier, its fastest pace in 22 months.
Andhra Bank is set for a 26.49 percent rise in profit to 2.04 billion rupees, while Indian Bank may post a 20 percent profit rise to 3.33 billion rupees, a Reuters poll of brokerages showed.
Union Bank's profit may jump 14.19 percent to 4.12 billion rupees, while Yes Bank is set for a 46.70 percent rise in profits to 933 million rupees.
Yes Bank will announce results on Oct. 21, Allahabad Bank on Oct. 22 and Indian Bank on Oct. 23.
IDBI Bank and Oriental Bank of Commerce will announce results on Oct. 26.
(Reporting by Tamajit Pain; Editing by Prem Udayabhanu)
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