Banking Sector Q3 Earnings Review - Stress Settles Lower; Growth, Earnings, Return Profile Looking Up: ICICI Securities

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ICICI Securities Report

Our apprehensions, articulated in Q3 FY21 preview that Q3 earnings will be a true performance test for banks, were addressed positively with number print echoing affirmative narrative.

1. Stress recognition (in the form of pro-forma slippages of 2-5%, Special mention account-2 pool) and invoked restructuring (at less than 1%) settled within or below the guided range;

2. credit cost was contained much lower than anticipated leading to earnings upgrade;

3. robust current account savings account accretion, sharp decline in deposit cost and release of liquidity buffer more than offset any adverse impact of interest income reversal and credit-deposit ratio moderation, leading to stable-to-improving net interest margin profile.

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