Analysts Expect Decline in NIMs for Leading Indian Private Sector Banks in 2024

According to Visible Alpha consensus estimates, private sector banks in India are expected to see net interest margins (NIM) decline in 2024 due to high deposit rates and tight liquidity. HDFC’s (NSE: HDFCBANK) NIM, which stood at 3.78% in 2023, is expected to decline to 3.62% in 2024. This trend is also evident in other major private sector banks in India including; ICICI Bank (NSE: ICICIBANK), Axis Bank (NSE: AXISBANK), and Kotak Mahindra Bank (NSE: KOTAKBANK). ICICI’s NIM came in at 4.53% in 2023 and is projected to decline to 4.43% in 2024. Meanwhile, Axis Bank and Kotak Mahindra Bank are estimated to see their NIMs decline to 3.81% and 4.94%, respectively.

In addition to declining NIMs, analysts also project a rise in the loan-to-deposit ratio for these banks compared to 2023. These challenges follow multiple quarters of deposit rate hikes, leading to elevated costs of funds for these banks. The tight liquidity conditions in the Indian banking system, coupled with rising demand for loans have compelled banks to offer higher rates on fixed deposits. However, this has resulted in difficulties in attracting deposits, leading to slower deposit growth compared to the fast pace of loan growth.

Sector: Financials
Industry: Diversified and Regional Banks
Tickers: HDBK_IN, ICBK_IN, AXBK_IN, KKTM_IN