3 key trends in Indian banks' loan growth

It's likely to range around 13-14% in FY13.

According to Nomura, the RBI released sector-wise monthly loan data for the month ending December 2012 and the analyst analysed the key trends in this note.

Here's more from Nomura:

A few important trends to note: 

1) Loan growth for FY13 is most likely to range around 13-14%. YTD loan growth has been 7.8% (non-annualised) and assuming we see the same quantum of loans in 4QFY13 as disbursed during 4QFY12, we arrive at FY13F loan growth of 13.5%.

2) Retail loans and agri loans are tracking the strongest – retail loans growing at 16.5% y-y and agri loans growing at 21.4% y-y. Within retail, the segments doing well are non-collateralized loans (credit cards and personal loans) and vehicle loans.

3) Industry loans continue to be weak and YTD, the key growth drivers within the industry have been power, iron & steel, chemicals, and roads.

As of December 2012, aggregate non-food credit growth was 14.3% yy with primary contributions from industry (13.7% y-y), agri (21.4% y-y) and retail (16.5% y-y).

On a YTD basis (April-December 2012), aggregate non-food credit growth was 7.8% over the base of March 2012, compared with 17% in FY12 and 20.6% inFY11. The key contributions to YTD growth have  come from retail loans at 9.8% and services at 8%. Agri loans grew at 7% while SME loans grew at 4%. Ex-infra industry growth was 5.5% during this period.

Within the industry sector, YTD growth for key sub-sectors was at 17.8% for power, 15.7% for iron & steel, 9.7% for engineering, 10.6% for roads, and 10.8% for chemicals. Loans to the telecom sector were flat YTD.

Within retail loans, vehicle loans had the highest YTD growth at 16.6%, followed by non-collateralised loans at 13.7% and mortgages at 9.5%. On a y-y basis, vehicle loans grew at 22.2%, noncollateralised loans at 26.4% and mortgages at 16.4%.

In the services segment, loans to NBFCs had the highest YTD growth at 14.3%. This is weaker than the growth seen during similar periods of FY12 and FY11. Trade and commercial real estate loans had YTD growth of 13.7% and 11%, respectively.

If we assume that the same quantum of loan growth for Jan 2013 to Mar 2013 as was achieved during Jan 2012 - Mar 2012, then we are likely to have loan growth of 13.5% for FY13F. This is marginally lower than the estimate of 14% calculated with the data for the period ending November 2012.

Assuming all these major sectors add loans similar to the quantum seen in Jan 2013 - Mar 2013, then we believe we are looking at the following potential growth rates for FY13F: aggregate non-food credit growth of 13.5%; industry growth of 13%; agri growth of 18.8%; SME growth of 11%; and retail loan growth of 15.5%.