BIG BANKS WIN GAME OF Q2 ESTIMATES

Big lenders have outperformed analysts’ estimates for the July-September quarter, giving hopes of green shoots for the sector. However, it will be some time before the sector is out of the woods.

- Neha Bothra

BANKS HAVE BEEN GOING THROUGH torrid times these past few years. The bad loans crisis hit hard, prompting banking regulator Reserve Bank of India (RBI) to step in and force lenders to go in for an asset quality review to recognise the towering pile of non-performing assets (NPAs). The underlying mess in the system presented bank CEOs with an opportunity to clean up their books. Quarter after quarter for four years, most bank managements assured investors of green shoots and a return to profitability “in a quarter or two”, but challenges continued to persist: long delays in the resolution of big-ticket accounts through insolvency proceedings, multi-billion dollar scams, and a debt crisis triggered by IL&FS to name a few.

Those long-awaited green shoots are finally here—at least for the big ones. Most big banks have beaten earnings estimates of analysts for the second quarter (July-September) of FY20. “The quarter has turned out better than anticipated for larger banks,” says Nitin Aggarwal, senior vice president-research and banking analyst, Motilal Oswal Institutional Equities.