BofA-ML sees credit growth diving to 15-year low in FY14

Bank of America-Merrill Lynch (BofA-ML) today said loan growth of Indian Indian banks will fall to a 15-year-low of less than 13 per cent in the current fiscal. "We are bearish on FY14 loan growth and expect that it to fall to less than 13 per cent, a 15-year-low," the American brokerage said in a report. Even this tepid growth will be driven by working capital loans and not corporate loans, which will grow by up to 15 per cent, it said, adding the same stream also contributed to the FY'13 growth coming at 15.5 per cent, which is above estimates. Corporate loan demand is likely to fall to 11 per cent in FY14 as against the just-ended fiscal's 16 per cent, the report said and noted that fresh approvals in the recent past are down by up to 70 per cent on a year-on-year basis.

For the current fiscal, key segments driving the loan growth will be retail products like mortgages, personal loans and cards, and thus private lenders will fare better than the public sector ones, it maintained. For private sector banks, loan growth will come in the 16-22 per cent range "as they gain market share, leverage on expanded distribution and maintain their dominance in sectors seeing better growth like mortgages, personal loans and parts of working capital," BofA-ML said. The country's largest lender, State Bank, is the only government-run bank which may deliver a surprise, it said. According to the report, mortgage loan growth will come in at up to 20 per cent "given the changing demographics and the sensitivity of mortgage to rate cuts and possible time value correction in property prices." On the positive side, the low loan growth may prompt banks to aggressively cut deposit and lending rates, it added.

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