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Bajaj Finance’s net profit for Q4 FY24 is expected to rise 22-34 per cent on-year, led by healthy loan growth and stable credit cost. However, higher cost of funds and contraction in margins could weigh on the bottomline.
“Our analysis of current household indebtedness, loan service capability and system-wise static pool performance of personal loans suggests that the only early sign of marginal asset quality worsening is for small-ticket loans (less than ₹50,000) from fintechs, and it poses no threat to Bajaj Finance’s growth momentum in its loan products,” BNP Paribas said in a note, adding that the lender’s 34 per cent loan growth “does assuage concerns on slowdown in unsecured lending”.
The NBFC will declare its Q4 results post market hours on April 25.
Bajaj Finance’s margins are likely to contract 47-50 bps on-year and 10-20 bps sequentially to 10.0-10.2 per cent due to a 5-15 bps q-o-q increase in the overall cost of funds, analysts said.
The rise in funding cost may impact net interest income (NII) traction, yet YoY momentum could be strong on the back of healthy AUM, Elara Securities said, adding that better other income will also support pre-provisioning operating profit.
NII is expected to climb 30-40 per cent on the back of AUM growth of 34-35 per cent yoy and 6-7 per cent qoq.
Operating expenditure is expected to remain stable with cost-to-income ratio seen at around 34 per cent, Motilal Oswal said, adding that credit cost is likely to decline 5 bps sequentially to 1.65 per cent.
However, Kotak Insititutional Equities accounted for an “increase in credit costs to 1.8 per cent (1.4-1.6 per cent in the previous four quarters), as guided by management in the last earnings call,” it said.
Asset quality is seen stable with gross NPA ratio at 0.9 per cent and net NPA ratio at 0.35 per cent.
Commentary on sustenance of growth momentum, margin trajectory, quality of lower ticket loan portfolio and scale-up of new products will be the key monitorables, analysts said.
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