>BANKING SECTOR Q2 FY10 RESULT PREVIEW (INDIA INFOLINE)

We expect 9 banks under one universe to report a modest 8% yoy net profit growth in Q2 FY10. The system credit and deposits have expanded by 2-3% qoq during the quarter. For most banks, NII growth would be ahead of loan book growth due to expansion in NIM. We expect UBI, PNB, Axis and Yes Bank to deliver 10%+ qoq NII growth. Margins would start improving across the sector from Q2 FY10 as banks retire their high cost deposits. Provisioning towards investment depreciation will be minimal as bond yields have increased by mere 14bps during the quarter. Asset quality might deteriorate as some of the loans which were restructured under the special restructuring window may have slipped.

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