Earningsup, out look slips

▶ Quarterly earnings of banks hit a new high in Q1FY22, but the industry outlook has deteriorated

▶ Earnings growth has largely come from a decline in interest costs and lower provisioning rather than the growth in loan book or higher interest income

▶ The YOY growth in gross interest income was lowest in at least four years

▶ Private sector banks were laggards hit by little growth in retail lending and a rise in bad loans in their retail book

▶ Public sector banks did better, but they, too, reported poor loan growth, which clouds their earnings outlook for FY22

▶ Retail non-bank lenders such as HDFC and Bajaj Finance mirrored their banking peers with poor growth in loan book

▶ Insurance companies’ earnings were hit by a spike in claims due to Covid-19 and a slowdown in new premium income

▶ Most analysts expect the BFSI sector to underperform the broader market in FY22