The elevated credit-deposition ratio of the banking sector underscores the constant importance of deposit dynamics to sustain the pace of 80.5% growth.
Personated Housing Finance Segment (HFCS) and Gold Loan providers (NBFCS) stood stood as strong artists, with gold loan AUM growing at ~ 29%. Vehicle Financers (NBFCS) reported steady distribution, benefiting from their fixed-rate loan portfolio, which saw ~ 20% yo-yo-growth.
However, mid-ticket mortgage loans (HFCS) and unsecured retail credit (banks/NBFCS) experienced slow growth as the lender was cautious.
The microfinance sector (NBFC-MFI), while still facing elevated credit costs up to–%%, shows an improvement in the efficiency of the collection-in Karnataka, where a significant recovery acquisition was seen in the March collection.
In most segments, the net interest margin (NIM) remained stable, though gold lender (NBFC) and affordable housing providers (HFCS) saw a modest compression of 10-15 BPS due to rising funds. With the reportable reforms of Housing Finance Companies (HFCS) and Power Financier (NBFCS), the quality of the property remained greatly stable.
This is a good position to benefit from a developed rate cycle, with potential RBI rate reductions expect to provide legged benefits in the coming months.
The financial sector is ready for 12% credit growth in the financial year 26, which is led by the secure credit segments. Vehicle Financers (NBFC) can see NIM expansion from potential rate cuts, while deposits are crucial for maintaining liquidity for mobilization banks.
The microfinance field can be normalized by H2FY26 if the storage trends continue. When challenges prefer the pocket of deposit growth and property quality, the field fundamentals remain strong, supported by stable macro economic conditions and improvement in operational trends.
The Nifty Financial Services Index is expected to reflect this elasticity, which has opportunities in the segment, showing sustainable development and sensible risk management.
Stock Elections:
Sriram Finance | Buy | Target: Rs. 775 | LTP: Rs. 653 | Side Ltd: 18%
Shriram Finance is in good position to earn recovery in vehicle finance, especially the demand for commercial and passenger vehicles. With a varied credit portfolio, the company will benefit from low borrowed costs, which will increase net interest margins and profitability.
Its diverse product Suite Commercial Vehicle (CV) helps reduce the cyclics of the business. Strong attention to the quality and storage efficiency of the property indicates that the company is well prepared to explore a developing credit environment. We expect AUM/abdomen to increase on CAGR of 18%/19% than FY 24-227.
HDFC Bank | Buy | Target: Rs. 2,050 | LTP: RS 1,817 | Side Ltd: 12%
HDFC bank is preferring profitability than volume, which is reflected in mediator loan growth (estimated at 4%/10%/13%of the financial year 25-227) because it exeases its credit-deposition ratio and moves towards high-yielding retail and commercial property. The latest deposit growth of 5.1.1% Yoy and increasing CASA ratio (.8 34..8%) signal improved funding stability, supporting margin expansion with expected NIM redovery procurement from FY 27.
Property quality remains strong (GNPA: 1.4%, NNPA: 0.5%) with stable credit costs (~ 50 bps). By replacing borrowings at a higher cost with deposits and increasing operating leverage leverage, the ROA/ROE is expected to increase to 1.8%/14.2% by FY 27-balancing disciplinary growth with persuasive profitability.
(Author Head – Retail Research, Motilal Oswal Financial Services)
(Disclaimer: The views given by recommendations, suggestions, opinions and experts are their own. This does not represent the views of the economic time)
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