Bond trading to rev up SBI Q2; ICICI eyes H2 recovery

The focus will shift to loan growth from a pile-up of bad loans as a reviving economy and improved business confidence ease concerns over asset quality.

"Our interaction with bankers suggests significant disbursements are expected in the second half," said Ajinkya Dhavale, an analyst at brokerage Motilal Oswal.

Indian bank loans rose 12.6 percent this year as of late September, central bank data showed, about half the level a year earlier. Motilal Oswal sees banks' loan growth at 17 percent in the year to next March.

Investor focus for State Bank will be on its loan growth and overseas plans. It said last month it was looking at acquisitions for up to $1 billion in Britain.

The bank, which, with associates, controls a quarter of Indian bank loans and deposits, is eyeing foreign acquisitions to boost its overseas profit contributions from about 10 percent.

At ICICI, the market will be watching for customer defaults, loan book contractions and the first signs of a revival in loan demand. CEO Chanda Kochhar said in July she expected loan growth to resume in the second half.

"We expect the bank to start growing its balance sheet from (the current fiscal) Q3 onwards and (bad debt) provisions to decline," said Abhijit Majumdar, analyst at broker Prabhudas Lilladher. "That should help earnings bounce back sharply in the second half."

A silver lining for ICICI in an otherwise difficult quarter would be its trading profits, analysts said. Trading gains, mainly from buying and selling bonds and shares, have driven profits of most banks, including smaller private sector rivals HDFC Bank and Axis Bank.

At end-September, 10-year bond yields were about 140 basis points lower than a year earlier, while the stock market was up by about a third. Bond prices move inversely to yields.