Heightened loan growth and improved margins are expected to increase the profitability of banks for the June quarter.
The first quarter experienced a 20% growth in advances of banks, the major chunk of which can however be owed to payment for 3G telecom spectrum auction.
The June quarter saw an increased pace in loan growth. According to Motilal Oswal, an over 40 per cent growth in net interest income (NII) is expected from banks like Andhra Bank, Bank of Baroda, Oriental Bank of Commerce and Union Bank of India. Also, ICICI Bank is likely to post a decline in NII.
"The recent pick-up seen in the home loan and auto loan segment augurs well for the banks to garner processing fees, apart from other non-fund- based fee income sources," said a Prabhudas Lilladher report.
However, it is expected that there would be a dip in the net interest margin of banks which is although expected to recover gradually.