I have some concerns and would really appreciate if someone with more knowledge about BFSI sector can help.
How would the NIMs play out during rate cut cycle? We all know that rate cut cycle will start possibly coming financial year. And although I don’t know how severe the rate cycle will be but my guess is that we could 150 bps rate cut over 1-2 years.
Now rate cut would certainly have an impact on the NIMs as the liability pricing will take time but asset repricing happens pretty much in real time.
With NIMs touching as high as 6.2%+ and yield on funds also one of the highest in top private sector banks. I don’t see ROAs touching 2% specially in medium terms or NIMs sustaining. Sure Cost to Income can go down but unsure of the impact there.
Can anyone give more insight. We have data of banks such as HDFC, Kotak, etc for previous rate cycle (when there were cuts) which certainly instils some confidence.
PS: I understand the bank has given 5 year guidance – However, I am not taking that on face value.
Disclosure: Invested and evaluating
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