Key Points
Mumbai: Banking profitability is likely to be hit by lower net interest margins (NIMs) as the increasing cost of deposits could not be totally offset by a corresponding rise in lending rates during the December quarter..
However, strong loan growth, stable asset quality and fee income will help banks still report an increase in profits year-on-year...
NIM, or the difference between the yield earned on advances and that paid for deposits, is considered a key metric of banking profitability..
Analysts say that the margin compression could hence be severe, particularly year on year, as banks have lost most benefits from the rise in interest rates in their bid to garner funds..
IDBI Capital analyst Bunty Chawla expects treasury income to support earnings as the benchmark 10-year government bond declined 7-10 bps during the quarter...
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