RBI repo rate and CRR hike-Prefer ICICI Bank over peers

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Due to glaring inflation risks also driven by global economic turmoil, the RBI Governor hiked the repo rate by 40bps to 4.4% while the CRR has been increased by 50bps to 4.5%, said Mr. Gaurav Jani – Research Analyst at Prabhudas Lilladher.

Implication on frontline Banks – PL view
Interaction with bankers coupled with our analysis suggests that the repo rate hike would be positive from a 3m perspective for banks that have a higher proportion of assets in the 0-3m bucket. Back of the envelope calculation suggests that this would be more beneficial for Kotak Bank then ICICI Bank followed by HDFCB, Axis and SBI.
The CRR hike would have a direct bearing on yields for FY23E and blended yields on earning assets that range from 7.5-8.0% would be impacted by ~4bps. This would hit banking PAT for FY23E on a post-tax basis by 3bps or 1-4%. The PAT hit would be lowest for ICICI Bank at 1.6% followed by HDFC Bank at 1.8% while it could be 2.7% for Axis and Kotak each. SBI could see the maximum impact of 4%.