Macquarie cautions that banks' medium-term loan growth may stall and that their profitability may be under pressure

 Macquarie cautions that banks' medium-term loan growth may stall and that their profitability may be under pressure

The retail and SME sectors will continue to be important medium-term drivers, but CASA will continue to be a significant obstacle for all banks.

In the last week, the Bank Nifty index has increased by 4%, while shares of major banks, such as State Bank of India (SBI), ICICI Bank, Axis Bank, HDFC Bank, and Kotak Mahindra Bank, have risen as much as 8%. Ahead of the 2024 elections, market players' hopes for a stable administration grew. In their most recent report, Macquarie analysts did, however, issue a warning that, in the medium run, the banking sector may see a halt in the expansion of credit and pressure on profits.

"We anticipate that the unsecured and NBFC categories will continue to develop slowly. The retail and SME sectors will continue to be important medium-term drivers, but CASA will continue to be a significant obstacle for all banks. Over time, we anticipate that credit costs will stabilize.However, a rise in margins is anticipated.In a recent statement, the brokerage company said, "There will be a contraction in FY25."

Macquarie holds a 'Neutral' rating for Axis Bank, with a target price of Rs 980 a share. We anticipate that the Reserve Bank of India's new risk-weighting guidelines will preserve profitability ratios. Operating expenditures are anticipated to be high, even as we anticipate credit costs to stabilize in the medium term," the brokerage business said.

Macquarie analysts issued a 'outperform' recommendation for HDFC Bank, with a target price of Rs 2,110 per share. "In four years, we anticipate the bank to achieve the four percent margin objective. Management said that because of the rapid expansion of NBFCs and some banks, RBI intervention to increase risk-weighting standards for unsecured loans was required. According to the brokerage business, asset quality is anticipated to stay robust and net interest margin (NIM) will be resilient to fluctuations in interest rates.

Macquarie, on the other hand, called for SBI to "outperform" with a target price of Rs 720 per share. "We have not yet assessed the pricing strategies for NBFCs and personal loans. Analysts said that after taking into account the effect of risk-weighting and profit growth in the first half, the adjusted CET-1 ratio was set at 10.5%.