Deposit growth in the system is way below loan growth, says Macquarie Capital
Suresh Ganapathy, Banking Analyst at Macquarie Capital Securities, on October 18, said the deposit growth in the system is way below loan growth. He was talking to CNBC-TV18 about Q2FY23 earnings expectations from the banking space and what are the hot favourites to watch out for.
Suresh Ganapathy, banking analyst at Macquarie Capital Securities, on Tuesday, said the deposit growth in the system is way below loan growth.
Speaking exclusively to CNBC-TV18 about Q2FY23 earnings expectations from the banking space, he said the deposit growth in the system is running way below loan growth and the net dollar retention (NDR) ratios of banks, at this point in time, are at the peak levels, 88-89 percent for HDFC and ICICI.
"Also, loan-to-deposit (LDR) is almost the limit that you can touch. So without an aggressive expansion of the deposit base, it becomes very difficult to get the loan growth," Ganapathy said.
According to him, the funding environment would get tough for NBFCs as there will be a further significant rise in deposit costs.
Also Read: As PSU banks rally, top fund manager describes what a 'goldmine' in the space should have
He further said banks are asset sensitive and they are clearly arguing that the RBI is not going to stop hiking repo rates. Banks have already hiked by 190 basis points, maybe another 50 basis points will start flowing in Q3 and therefore, banks will continue to see margin expansion.
Two big private banks that announced results have exceeded expectations. HDFC Bank posted loan growth of 23 percent and Federal Bank's loans grew by 20 percent. Both banks reported a 10 basis point rise in net interest margins; both improved their return ratios.
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