FCNR-B inflows lift Q2 bank growth; underlying deposits stay softer: Jefferies

Mumbai (Maharashtra) [India], October 6 (ANI): Indian banks reported stronger loan and deposit growth in the September quarter, but the underlying pace of deposit expansion was softer at several large private lenders after excluding the boost from FCNR-B inflows, according to a Jefferies report.
“Pre-Qtr releases of select Indian banks show healthy loan & deposit growth, reflecting buoyant core & lift from FCNR-B raising,” Jefferies said.
The brokerage said the headline numbers were partly supported by foreign-currency deposits, while underlying trends were more moderate.
“Core loan growth (ex FCNR-B) trends were stable, and banks have partly used FCNR-B deposits to repay high-cost deposits & improved LCR, so adjusted deposit growth is slightly softer but of better quality,” the report said.
At Axis Bank, reported year-on-year loan growth stood at 23 per cent and deposit growth at 21 per cent in the September quarter. After adjusting for FCNR-B, Jefferies estimated loan growth at 19 per cent and deposit growth at 12 per cent.
Kotak Mahindra Bank reported 25 per cent loan growth and 23 per cent deposit growth. Excluding the FCNR-B effect, these stood at 21 per cent and 13 per cent, respectively.
At IDFC First Bank, reported loan and deposit growth were 30 per cent and 26 per cent, respectively, while adjusted growth stood at 20 per cent and 14 per cent.
“The bank has utilised FCNR-B deposits to repay deposits & CDs; LCR has improved from 116% in June to 125%,” Jefferies said.
HDFC Bank reported loan growth of 16 per cent and deposit growth of 19 per cent. After excluding the FCNR-B impact, Jefferies estimated the corresponding growth at 14 per cent and 15 per cent.
The report also flagged weakness in low-cost deposits.
“Gold & Corp WC loans continue to grow fast; Casa deposit growth lags. Collection trends, in MFI & SME, are largely stable,” Jefferies said.
The findings suggest that while banking growth strengthened in the quarter, part of the reported acceleration came from FCNR-B mobilisation, while the underlying deposit picture remained more moderate. (ANI)