Banking Sector Q1 Earnings Review - Episodic Factors All-Pervasive; Business Is In Transition: Systematix
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Systematix Research Report
The banking system’s Q1 FY22 performance was characterised by muted balance sheet expansion (cyclical phenomenon), with an uptick in margins led by elevated one-off non-recurring non-interest income streams.
The absence of wage revision related provisions led to lower establishment costs for state-owned banks.
Credit quality deteriorated further as mobility was restricted due to Covid-19 led sporadic lockdowns.
Officials/agents could not visit field areas for collections which led to high non performing loans in overdue accounts and also hindered NPL upgrades.
We expect additional credit restructuring in the coming quarter, leading to a rise in NPL upgrades optically.
This would minimise specific credit costs and lead to higher standard asset provisioning.
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