HDFC Securities: Banking Sector Outlook - Near-Term Net Interest Margin Headwinds
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HDFC Securities Report
The downtrend in lending and deposit rates has expectedly persisted and the following broad trends stand out:
The lending rate on fresh loans (weighted average lending rate (fresh)) has seen the greatest fall so far, particularly in the case of private banks.
The fall in term deposit rates (weighted average term deposit rate) has exceeded the fall in lending rate on outstanding loans (WALR (outstandings)).
However, the fall in lending rate on outstanding loans is beginning to accelerate.
The median marginal cost of funds-based lending rate (MCLR) too has trended down, but the reduction has been significantly lesser than that in lending rates on fresh loans and is more recent in case of private banks.
Banks have cut their deposit rates sharply, with large private banks leading the way. Within our coverage universe of banks, most have seen a QoQ rise in their liquidity coverage ratio (LCR) and high-quality liquid assets (HQLA), and Most of these banks’ net interest margins compressed QoQ.
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