A PRECURSOR ON BANKS’ Q3 RESULTS

The results for the quarter ended October to December 2016 is expected to be better for the Banks.  In the same quarter last year, banks had reported a dismal performance with an increase in the bad loans and provisioning therein, with Reserve Bank of India stressing for an Asset Revaluation.  In the third quarter, the results are expected to be far better than before.  It is expected that

1. An increase in the Corporate Loans, as compared to the Retail Loans, which possibly would result in an increase in a 100%, increased growth.
2. The slippage in asset quality is also expected to reduce, especially Public Sector Banks, perhaps to the tune of 10%.
3. This coupled with a continued momentum on collections, would result in a Flat NPA in almost all banks (of-course except SBI)
4. The pain expected to be felt in the asset quality due to demonetization is not likely to be sensed in the current quarter.  On the contrary due to demonetization there is lot of pre- payment in retail and small & medium enterprises segments.
5. The effect of demonetization is likely to affect the fee income, since the transaction fee on ATM operations and merchant discount rates for various transactions were waived from 9^th November 2016 to 31^stDecember 2016.
6. Though asset quality may not be affected, the retail  Loans Portfolio might get a hit, since there is fall in the loan takers despite a cut in the interest rates.
7. The fee income component of Treasury income is likely to compensate the losses vis-à-vis the net interest income is likely to remain stable.  The impact of reduction in bench mark lending rates might be felt by the economy.

Also Non-Banking Finance companies are expected to pose stable results in the said quarter, though the current quarter might give some concern.