>India Banks (BNP PARIBAS)

3QFY09 Earnings Wrap

We summarize the key trends from the 3QFY09 earnings for our banks
coverage universe and also infer some takeaways for the few quarters
ahead. All our earnings estimates are currently under revision.

* Loan growth: A sequential slow down in loan growth was evident for
the banks, barring Axis Bank and Bank of India. Y-y credit growth was
still robust at 25%. On an average, we clearly expect more muted loan
growth – in the sub 15-18% range for our coverage universe.

* Deposit growth: Total deposit growth continues to be robust, y-y
growth in the range of 27% (28% for CASA and 27% for term deposits).
But the flight-to-quality of deposits was evident, with SBI recording a
sequential increase of 12% in deposits compared with 8% for HDFC
Bank, 3% for Axis Bank and -3% for ICICI Bank. We expect term deposit
growth to slow down – muted loan growth driving less demand for term
deposits and lower deposit rates in general.

* Net interest margins: 3QFY09 saw a flat to modest expansion in NIMs
across our coverage universe – flat for ICICI and SBI, a 20bps
expansion for BOI and a 39bps contraction for Axis Bank. These trends
were primarily resulting from the magnitude of expansion in the loan
book and the resulting need for high cost term deposits.

To see full report: India Banks