Financial Services Sector — Q1 FY24 Earnings Overview

Management is investing aggressively in branches, relying on benign credit costs to fund the investment. If credit costs revert to historical mean (90-110 bps), profitability could be pressured.

Rapid growth in personal loans and credit cards (40.6% YoY) could lead to higher NPAs or regulatory risk-weight increases if industry stress emerges.

Cost of deposits is expected to rise for 2-3 quarters, pressuring NIMs further before stabilization.

Management flagged increasing leverage in the system, especially in personal loans, and is taking preemptive actions to tighten underwriting.

Rural B2C portfolio flagged as yellow due to elevated risk; business has been cut by INR 200-250 crore per month.