印度金融行业：公共部门银行的持续激进策略——私营部门银行面临的最大风险

Most of our recent investor conversations have been centered around macro themes -softening credit growth, the outlook on rate cuts and near-term margin pressures. However,we believe the key but underappreciated medium-term risk to the Private Sector Banks(PVBs) is the increased aggression from Public Sector Banks (PSBs) and the resultantincrease in growth and/or profitability pressures for PVBs.PVBs- no longer the growth champions:PSBs are now outpacing PVBs on loan growthby 4 pp! Even after excluding HDFC (that’s busy mending its balance sheet), the gapremains a material 2 pp. And this outperformance spans multiple segments — the usualsuspects like mortgages and corporate loans as well as several non-mortgage retailsegments such as auto loans.The risk to the premium valuations:PVBs have historically commanded premiumvaluations due to their steady market share gains — growing ~6-7 pp faster than the systemgrowth rates. And in the long-term we expect PVBs to emerge as winners led by theirconsistent deposit share gains. However, if the growth advantage continues to narrow inthe medium-term, the case for premium valuations weakens. While PVBs still offer above-average profitability and trade at reasonable valuations, the current risk of a relative growthslowdown may not be fully priced in.We aren’t hitting the panic button — yet.Despite the shift in loan growth trends, weare taking comfort from the still better deposit growth of PVBs, especially CASA deposits,which is a better indicator of long-term growth potential. Also, much of the PSB growth hascome at the expense of margins, raising questions around the sustainability of the highergrowth, especially as the recent quarters have seen the PSBs benefit from healthy Non-interest income gains and ultra-low credit costs (thanks to recoveries) that have limited RoAimpact of aggressive pricing.What are we tracking?The key variable to monitor is whether PSBs sustain theiraggressive pricing strategy even as other profitability tailwinds (Credit costs, non-interestincome) fade. If PSBs show a willingness to operate with sub 1% RoAs to protect/gainmarket share, it could become a sector-wide headwind, particularly for PVBs.We remain constructive on the banking sector, including PVBs, given reasonable valuations,expected pickup in system credit growth, and margin recovery potential. However, we viewPSB aggression as a key medium term risk that warrants close tracking.www.bernsteinresearch.com BERNSTEIN TICKER TABLETickerRatingAXSB.INOHDFCB.INOICICIBC.INMIIB.INOKMB.INMSBIN.INMASIAXO - Outperform, M - Market-Perform, U - Underperform, NR - Not Rated, CS - Coverage SuspendedSource: Bloomberg, Bernstein estimates and analysis.INVESTMENT IMPLICATIONSWe rate HDFC, Axis and IIB as Outperform and ICICI, KMB and SBI as Market-Perform.Links to other recent reports:2 Jun 2025 - India Financials: Growth Around the Corner23 May 2025 - India Financials: Waiting for the growth rebound21 May 2025 - India Financials: The shift in deposit pricing power25 Apr 2025 - India Financials: Deposits - A warning from Jakarta and comfort from Bangkok23 Apr 2025 - ICICI Bank: What is driving deposit dominance?21 Apr 2025 - India Financials: Revised LCR guidelines - a big liquidity boost set for next year21 Apr 2025 - India Financials: HDFC vs. ICICI- 4Q25: Has anything changed?17 Apr 2025 - India Financials: Will CASA deposits go extinct?15 Apr 2025 - Kotak: Mind the marginsINDIA FINANCIALS DETAILSIn most of our recent investor conversations, the focus has remained on macro variables like softening credit growth, the quantumand timing of rate cuts, and the near-term impact on bank margins. However, we believe the mostunderappreciated medium-term riskto thePrivate Sector Banks (PVBs)is theincreased aggression from Public Sector Banks (PSBs)— a trend thatcould lead to negative surprises on bothgrowthandprofitability.PVBS- NO LONGER THE GROWTH CHAMPIONS•PSBs’ loan growth is now 4 pp higher than that of PVBs! Even after excluding HDFC (that’s busy mending its balance sheet),PSBs are still growing 2 pp faster than PVBs (Exhibit 1, Exhibit 2).•And this outperformance is not limited to just the corporate segment where they have seen stronger growth for the lastseveral quarters (Exhibit 3).•PSBs are delivering stronger growth in retail loan growth too (Exhibit 4) and digging deeper, PSBs have outperformed thePVBs in mortgages (Exhibit 5, Exhibit 6) and top PSBs are even gaining share in non-mortgage consumer segments (Exhibit7) including auto loans (Exhibit 8).THE RISK TO THE PREMIUM VALUATIONSPVBs have historically commanded premium valuations due to their steady market share gains — often growing 4–6 pp fasterthan the system. If this growth premium begins to fade, the rationale for those valuations weakens.While PVBs still offer much higher profitability (in RoA terms) and trade at reasonable valuations, the risk of a relative growthslowdown is only partially priced in. If PSBs continue to grow faster