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Published on 28/03/2020 12:41:45 PM | Source: HDFC Securities Ltd

Banking Sector Update - Banks: Sector Credit Trends - HDFC Securities

Posted in Broking Firm Views - Sector Report| #Banking Sector #HDFC Securities #Sector Report

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Green shoots?

After declining for 2 consecutive months, YoY growth in non-food credit increased to 8.5% in Jan-20. This trend was broad-based. Agri-credit growth showed a modest improvement (6.5% YoY vs. 5.3% YoY in Dec-19). Industry credit growth improved slightly (2.5% YoY vs. 1.6% YoY in Dec-19) but remained weak and continued to drag overall credit growth. Service credit growth, which had slowed sharply to 4.8% YoY in Nov-19, increased to 8.8% YoY. Growth in personal loans remained healthy at 16.9% YoY. Overall FYTD growth was just 3.1%. However, a significant portion of credit growth tends to occur in 4Q.

It remains to be seen whether this uptick is transient or more permanent.

* Within industrial credit, certain sectors such as gems and jewellery (-12.1% YoY) and basic metals and metal products (-9.3% YoY), led by iron and steel saw persistent de-growth.

* Overall infra credit growth slowed slightly to 5.1% YoY vs. 5.9% YoY in Dec19 with negligible growth in credit to the power sector (54% of infra credit). Credit for roads grew 2.8% MoM. YoY growth in telecom credit was pronounced at 46.6% but MoM growth slowed to 1.3% vs. 2.6% in Dec-19.

* Strong growth trends to seemingly precarious services sectors- CRE (+14.7% YoY) and NBFCs (+32.2% YoY) continued. CRE saw sharp MoM credit growth at 3.5% while credit to NBFCs grew merely 1.2%. Growth in credit to the NBFC sector has occurred in spurts.

* Wholesale trade credit has seen a noticeable pick up, growing 3.8% MoM in Jan-20 and 5.1% MoM in Dec-19. Retail trade credit, however, has seen sluggish trends, as it dipped 1.1% MoM in Jan-20. Overall trade credit growth consequently dipped to 4.8% YoY in Jan-20 from 5.8% YoY in Dec19.

* Personal Credit growth accelerated 100bps vs. Dec-19 to 16.9% YoY in Jan20. This was led by a sharp acceleration in growth in credit card debt (+31.6% YoY, vs. 25.3% YoY in Dec-19).

 

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