UBS Equities-India Banks _Retail loans took a breather in FY25 while MSME...-116710304

ab21 July 2025Global ResearchIndia BanksRetail loans took a breather in FY25 while MSME kept growing Retail lending has seen consolidation: private banks have lost share in FY25We analysed Retail/MSME loan book (c65% of system lending) based on data from CRIF High Mark and their latest "How India lends" report. Key takeaways: 1) Demand trends in FY25 for most retail loan products were weak since new originations growth in FY25 declined YoY (-c3% to 5%, vs 14%-28% average in FY23-24). 3) For Home Loans (HL) and Auto loans (AL) segments, private sector banks have lost market share in FY25 (to SOEs) by c7pp/3.5pp (Fig.27 Fig.46, Fig.55 2gh38), while maintaining share in most other products. 3) SOE banks have ceded c3 ppt share to NBFCs in PL originations in FY25 (Fig.10), 4) Early delinquency (1-90 days past due) for Loan Against Property (LAP), Commercial Vehicle (CV) and Auto (Car) loans is still 20-70bp (Fig.3) above March levels (despite MoM decline). 5) Credit card loans in May 2025 have seen continued improvement in the first bucket (1-30 dpd, Fig.20) vs Dec 2024. 6) Share of larger-ticket borrowers rose in most products during FY25. Overall, we expect c12% (FY26E) system loan growth with acceleration in H2FY26E (vs c9.5% as of June). We prefer HDFCB and ICICI.Early delinquency for LAP, CV, Car loans stayed higher in May (vs March) In May 2025, LAP/CV Early delinquency (1-90dpd) was 20/70bp higher vs March (MoM decline of 40/70bp) to 5.5%/17.7%. For CC/PL, early delinquency is 10/50bp lower vs March at 4.7%/5.9% (declined 10/30bp MoM). For Car/Home Loans, it is up20bp/flat vs March at 5.7%/4.7% (declined 20/40bp MoM). Early delinquency (1-90dpd) for BL is 10bp lower vs March at 6.6% (down 70bp MoM). 90-360dpd book was up -10 to +30bp for most products (vs March).MFI 1-90dpd was c20bp lower in May at 3.9% vs March while 91-360dpd was up 150bp. In FY22-25, delinquency performance for different ticket sizes has varied slightly in products like HL, PL, Auto loans. MSME Loan growth (c20% YoY, Fig.24) and delinquency (31-180 dpd at 2.9%, Fig.27) remained stable as of March 2025.Private sector banks: BL 1-90dpd up 50bp (May vs March) In May, Early delinquency (1-90dpd) in PL book was down 20bp vs March (30bp MoM) for private sector banks to 2.5%. Early delinquency for CC receivables was down 20bp in May (vs March, flat MoM) for pvt. banks (c69% share) to 4.6% and was at c5% for rest of the industry (Flat vs March, down 240bp vs Dec). For BL by Pvt. banks (c34% share), early delinquency (1-90dpd) was 50bp higher in May vs March at 4.5% (but down 100bp vs April), while it was up 40bp in May (vs March) for SOE banks. 1-90dpd for LAP by Pvt banks (c41% share) is up 10bp vs March at 2.5% (down 20bp MoM). May early delinquency data is showing MoM improvement across products for NBFCs after some worsening in April. 1-90dpd trends in BL are improving for NBFC but remains higher vs historical numbers. CIFC, BAF and Shriram have exposure to the segment. Fo