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Private sector lender <keyword id="19952948" type="General" weightage="20" keywordseo="Axis-Bank" source="keywords" meta.keywordsubtype="org" meta.entityname="Axis Bank" meta.hostid="261" meta.entityid="Axis Bank">Axis Bank</keyword> on Wednesday reported a net profit of Rs 7,129 crore for the fourth quarter ended March 31, 2024. The bank had reported a net loss of Rs 5,728 crore in the March quarter of 2022-23 fiscal. Total income rose to Rs 35,990 crore in the March quarter of 2023-24 fiscal, from Rs 28,758 crore in the year-ago period. The bank's Net Interest Income (NII) grew 11 per cent Year-on-Year (YoY) to Rs 13,089 crore. For 2023-24 fiscal, the net profit jumped 160 per cent to Rs 24,861 crore. The numbers for the March quarter of 2022-23 fiscal and the full fiscal include the impact of exceptional items relating to the <keyword id="19941660" type="General" weightage="20" keywordseo="citibank" source="keywords">Citibank</keyword> business acquisition, Axis Bank said. Its balance sheet grew 12 per cent YoY to Rs 14,77,209 crore as on March 31, 2024. The bank issued 1.24 million new credit cards in the March quarter of FY24 and has been one of the highest credit card issuers in the country over the last nine quarters, Axis Bank said in a regulatory filing. The bank's board has recommended a dividend of Re 1 per equity share of the face value of Rs 2 per equity share for FY24. Shares of Axis Bank settled at Rs 1,063.70 apiece, up 0.69 per cent over the previous close on the BSE. SEE ALSO:<a href="https://www.businessinsider.in/tech/mobile/news/realme-narzo-70-narzo-70x-5g-smartphones-launched-in-india-starting-at-11999/articleshow/109557895.cms" target="_blank"></a> <a href="https://www.businessinsider.in/tech/mobile/news/realme-narzo-70-narzo-70x-5g-smartphones-launched-in-india-starting-at-11999/articleshow/109557895.cms" target="_blank">Realme Narzo 70, Narzo 70X 5G smartphones launched in India starting at ₹11,999</a><a href="https://www.businessinsider.in/tech/news/gigabyte-aorus-co49dq-49-inch-qd-oled-144hz-curved-gaming-monitor-launched-in-india/articleshow/109563798.cms" target="_blank"></a> <a href="https://www.businessinsider.in/tech/news/gigabyte-aorus-co49dq-49-inch-qd-oled-144hz-curved-gaming-monitor-launched-in-india/articleshow/109563798.cms" target="_blank">GIGABYTE AORUS CO49DQ 49-inch QD-OLED 144Hz curved gaming monitor launched in India</a><a href="https://www.businessinsider.in/tech/news/apple-let-loose-event-scheduled-for-may-7-ipads-expected-to-be-launched/articleshow/109553148.cms" target="_blank"></a> <a href="https://www.businessinsider.in/tech/news/apple-let-loose-event-scheduled-for-may-7-ipads-expected-to-be-launched/articleshow/109553148.cms" target="_blank">Apple Let Loose event scheduled for May 7 – New iPad models expected to be launched</a>

Axis Bank posts net profit of ₹7,129 cr in March quarter

<ul class="summary-list"><li>Bank of America says a jump in mentions of "bottom" in earnings calls is a positive sign.</li><li>Mentions of "weak demand" also fell to a two-year low. </li></ul>Executives have been dropping hints in third-quarter earnings calls that suggest corporate profits will surge in 2025, according to <a target="_blank" class="" href="https://markets.businessinsider.com/stocks/bac-stock">Bank of America.</a>Strategist Savita Subramanian highlighted in a Monday note that with more than one-third of <a target="_blank" class="" href="https://markets.businessinsider.com/index/s&amp;p_500">S&amp;P 500</a> companies having reported results, mentions of the word "bottom" on earnings calls have surged."Companies have been operating in a weak demand environment for almost two years now due to the weakness in goods/manufacturing. But we see signs that the worst may be behind us," Subramanian said. Bank of America scanned the transcripts of third-quarter earnings calls and observed a 56% year-over-year increase in the word "bottom" being mentioned.On top of that, mentions of "weak demand" have dropped to two-year lows, a good sign for cyclical companies in the manufacturing economy."Historically, a jump in 'bottom' mentions has often marked an inflection in EPS," Subramanian said.Notable surges in the word "bottom" being mentioned on earnings calls in 2009 and 2020 were soon after marked by a more than 75% year-over-year surge in S&amp;P 500 quarterly earnings per share, according to the note.<div type="image" title="chart of S&amp;P 500 earnings" height="537" width="1207" msid="114741554" hostid="261" sizebytes="53224"></div>These signals suggest to Subramanian that manufacturing activity will pick up in the first half of next year as the Fed is likely to continue lowering interest rates and <a target="_blank" class="" href="https://www.businessinsider.com/market-impact-presidential-election-scenarios-trump-harris-stocks-bonds-crypto-2024-10">uncertainty about the Presidential election passes.</a>Subramanian said that the word "election" being mentioned on earnings calls has soared 62% compared to the 2020 election cycle, suggesting "a potential 'wait-and-see' investment approach given the uncertainty.""Interestingly, history suggests that investment activity typically accelerates post-election. We believe the election could be a clearing event for companies to unleash capex, especially with lower rates," Subramanian said.

A hint in 3rd-quarter earnings calls suggests S&P 500 corporate profits are about to boom, Bank of America says

As the results season kicks in, the <keyword id="20097634" type="General" weightage="20" keywordseo="quarterly-earnings" source="keywords">quarterly earnings</keyword> numbers of several <keyword id="22405488" type="General" weightage="20" keywordseo="blue-chip-firms" source="keywords">blue-chip firms</keyword> — such as <keyword id="19906778" type="General" weightage="20" keywordseo="Infosys" source="keywords" meta.keywordsubtype="org" meta.entityname="Infosys" meta.hostid="261" meta.entityid="Infosys">Infosys</keyword> and Reliance Industries — along with <keyword id="20837523" type="General" weightage="20" keywordseo="global-trends" source="keywords">global trends</keyword> and <keyword id="20223116" type="General" weightage="100" keywordseo="trading-activity" source="keywords">trading activity</keyword> of foreign investors, will determine <keyword id="22405487" type="General" weightage="20" keywordseo="equity-market-movement" source="keywords">equity market movement</keyword> in the holiday-shortened week ahead, according to analysts. The domestic <keyword id="22405489" type="General" weightage="20" keywordseo="WPI-inflation-data" source="keywords">WPI inflation data</keyword> for June — scheduled to be announced on Monday — will also influence trading sentiments, traders said. Markets will remain closed on Wednesday for Muharram. Among major quarterly earnings to be tracked this week are from HDFC Life Insurance Company, Bajaj Auto, BPCL, JSW Steel, Asian Paints, Infosys, and Reliance Industries. "Q1 earnings will be a key focus this week as numerous companies, including heavyweights Infosys, and Reliance, are set to release their results. Additionally, <keyword id="22194639" type="General" weightage="20" keywordseo="pre-Budget-discussions" source="keywords">pre-Budget discussions</keyword> are expected to contribute to market volatility," Santosh Meena, Head of Research, Swastika Investmart Ltd, said. On the global front, a significant focus will be on China. The country is scheduled to announce its GDP and Industrial Production (IIP) numbers, Meena said. "Other global factors to watch include the speech by the US Federal Reserve Chairman, US retail sales figures, and macroeconomic data from Japan," he added. Meanwhile, IT services company HCL Tech on Friday posted a 20.4 per cent rise in consolidated net profit to Rs 4,257 crore for the June-ended quarter and gave a revenue growth guidance of 3-5 per cent for FY25 on GenAI diversification and strong operational execution. "On Monday, markets will react to India's inflation data. Key results this week include Jio Financial Services, HDFC Life, Asian Paints, LTIMindtree, Infosys, Wipro, JSW Steel, Paytm, etc. Also globally, investors will take cues from China's GDP numbers, US core retail sales data, and ECB (European Central Bank) interest rate decision," Siddhartha Khemka, Head, Retail Research, Motilal Oswal Financial Services Ltd, said. Retail inflation increased to four-month high of 5.08 per cent in June as food items, including vegetables, became dearer, according to government data released on Friday. Vinod Nair, Head of Research, Geojit Financial Services, said, "We expect stock-specific moves to gain traction due to the ongoing earnings season; indeed, IT will be in the limelight due to the good start to the earnings and outlook." In the week ahead, economic data like China GDP, EuroZone CPI inflation, ECB policy, and the US Fed chair speech will be watched by investors to get cues on market momentum, Nair added. On a weekly basis, the BSE benchmark jumped 522.74 points, or 0.65 per cent, while the Nifty climbed 178.3 points, or 0.73 per cent. The 30-share BSE Sensex jumped 622 points, or 0.78 per cent, to settle at a record closing level of 80,519.34 on Friday. During the day, it zoomed 996.17 points, or 1.24 per cent, to hit an all-time high of 80,893.51. The NSE Nifty surged 186.20 points, or 0.77 per cent, to settle at a record closing high of 24,502.15. Intra-day, it jumped 276.25 points, or 1.13 per cent, to hit a new lifetime peak of 24,592.20.

Trading activity to hinge on Q1 results, global trends in holiday-shortened week: analysts

<div type="image" title="The RBI has cracked the regulatory whip on NBFCs and banks, who&amp;#39;ve been pushing microfinance and unsecured loans aggressively to grow their loan books." agency="ANI" msid="114778648" hostid="261" caption="&amp;lt;p&amp;gt;The RBI has cracked the regulatory whip on NBFCs and banks, who&amp;#39;ve been pushing microfinance and unsecured loans aggressively to grow their loan books.&amp;lt;/p&amp;gt;"></div> Imagine this. You have a younger sibling you’re mighty envious of. And why not? Unlike you, they seem to enjoy all the freedom and money in the world. They party like there’s no tomorrow, and here you are, stuck in a boring, ultra-disciplined but responsible routine that feels completely devoid of any independence, and mostly, funds. But of late, things are changing. This sibling is in massive trouble and just cannot escape the parent’s wrath anymore. Long story short, the party is over, and it is time to go back home. The rising defaults on this sibling’s part have now begun pulling the entire house down, thereby attracting the regulator’s ire. <h2>The Wild West of <keyword id="113684" type="General" weightage="20" keywordseo="microfinance" source="Orion">microfinance</keyword> and unsecured loans</h2>It's hard to ignore the issues with microfinance and unsecured loans in India. Many saw them as a small gamble and ignored the rising defaults much like the younger siblings’ tantrums, and now they find themselves in hot waters. The skyrocketing instances of non-payments aren't a micro-issue anymore and are threatening the stability of the entire banking system. In the quarter ended September 30, 2024, 5 of India’s 8 largest private sector <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> reported a steep rise in their bad loan book, mostly thanks to microfinance loans. Some banks, in a bid to strengthen their fortress against these <keyword id="142154" type="General" weightage="100" keywordseo="bad-loans" source="Orion">bad loans</keyword>, have significantly upped their provisions. For instance, IndusInd Bank set aside Rs 525 crore during July and September 2024 to battle the menace of defaults on microfinance loans, which make up about 9% of its total loan book. See, banks rely heavily on their interest income, which they earn from advancing loans. Any loan where the borrower has not paid interest to the bank or defaulted for 90 days or more becomes bad, i.e. an NPA, or non-performing asset for the bank. And who likes things going bad? Simply put, there has been a steep rise in three areas, much to the dislike of banks and MFIs (micro-finance institutions). But hey, it's mostly their doing! <ol><li>GNPA ratio (gross net performing assets): The quantum of non-performing assets a bank has in proportion to its total assets.</li><li>Provision: The amount banks set aside to take care of such NPAs.</li><li>Slippage ratio: The rate at which good girls go bad, or the speed at which good loans turn into NPAs</li></ol>But how are these plaguing the Indian banking sector? And what does the road ahead look like? We decode it for you. <h2> Microfinance: A not-so-micro-menace</h2>Microfinance loans were initially brought forth for low-income households and individuals i.e. for those who might not generally have access to traditional ways of credit, like bank loans and more. They don’t require collateral or an asset to be pledged in lieu of the loan, making it a tad bit easier for borrowers. As of June 2024, the amount of outstanding loans in the microfinance industry stood at a staggering Rs 4,20,256 crore. Of this, NBFC-MFIs accounted for 40% and banks made for 33% of these. In 2022, RBI, in a bid to inspire some competition in this space, did something radical-they did away with the ceiling on how much interest MFIs could charge their customers. Previously, MFIs could add up to 12% to their cost of acquiring funds to determine the final interest rate chargeable to the consumer. So, assuming that Bank A incurs a 5% cost to acquire funds for further loaning, A could charge up to 17% interest from the end consumer. So, interest rates were in the hands of MFIs, and boy, did they have a gala time with it. Instead of spurring some healthy competition, as RBI expected, MFIs and banks went rogue and all guns blazing, competing for the title of “Who will charge the highest interest?” Recently, RBI banned 4 microfinance institutions (MFIs), namely Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and <keyword id="20117932" type="General" weightage="20" keywordseo="navi-finserv" source="keywords">Navi Finserv</keyword> from disbursing loans effective October 21, 2024. Why? Because they were charging 14% extra interest over their original cost of funds. To maintain their loan books (and pockets), banks and NBFCs resorted to shady practices like netting off loans, which RBI has now advised MFIs against. Here, lenders allow borrowers to settle a previous outstanding loan by issuing them a new loan! As crazy as it sounds, it helped banks to report less of their total assets as NPAs, since the new credit would cover pending instalments of the borrower’s previous loan. Then there was the issue of borrowers overleveraging, i.e. taking multiple loans using different IDs from various lenders and then failing to honour any of them. The consequence? Banks and NBFCs end up with massive NPAs. Data from credit bureaus suggests that over the last quarter, there was a 17.2% rise in the number of borrowers who had 5 or more active loans at the same time. <h2>Growth &gt; Caution</h2>It's an age-old tale unfolding yet again in India’s banking sector- Icarus flew too close to the sun and eventually, fell to its death. Between April and June 2024, NBFCs microfinance portfolio jumped by 2.7%. If you see this in terms of loan sources, microfinance loans issued by banks grew by 11.2% in Q1FY25. But the same portfolio in NBFCs swelled by almost double-23.9%. While most of these loans had an average ticket size between Rs 30,000-50,000, there was a sharp spike in the number of loans that had a ticket size of Rs 80,000 or more. Data suggests that as of March 2024, more than 12% of all microfinance borrowers had over 4 or more active loans. In dating parlance, this is a classic case of borrowers going polyamorous, minus the honesty and transparency. Not the best of situations, you'd agree! <h2>Will banks and NBFCs stand up to this stress?</h2>If their results for Q2FY25 are to be believed, NBFCs are not handling the pressure all that well. Or even slightly well. Only a few banks like Bank of Baroda (BoB), ICICI, and Indian Bank were up for the battle, even witnessing a decline in their loan delinquencies. Some others, like IndusInd Bank, saw their stock dip by a massive 16.2% over the last 5 days. Its slippages in the previous quarter burgeoned from Rs 15.3 billion in Q1FY25 to Rs 17.9 billion in Q2. As a result, the bank pushed a staggeringly high amount of money to create an NPA cushion for itself. While its management has highlighted its preference for secured lending, that was hardly reflected in its actions during the quarter, where growth in unsecured personal loans remained exceptionally high at over 7% on a QoQ basis. Turns out, only 44% of customers in IndusInd Banks’ microfinance loan portfolio were exclusive to it. The rest 47% were, you guessed it right-polyamorous! 27% had borrowed from another lender as well, apart from IndusInd Bank, while 20% were those who had outstanding loans with two other lenders, apart from IndusInd Bank. IndusInd Bank’s credit card segment did not miss the NPA bus and accounted for 7-8% of its GNPAs. Canara Bank’s total slippages during the previous quarter jumped to Rs 11.1 billion, up by 24.7% QoQ, and making up for 3.6% of its total loans. As for Bandhan Bank, its gross NPA for Q2FY25 inched up on a QoQ basis, up from 4.23% in Q1, to 4.68% in the second quarter. IDFC Bank’s heavy provisioning for its NPAs marred its profits significantly, causing its PAT (profit after tax) to dip by 73% on a YoY basis. Data from ICRA Analytics suggest that the AUM (asset under management) growth in microfinance loans and unsecured (personal and business) loans by the NBFCs will moderate to 10-12% and 19-21%, respectively, in FY2025 compared to 30% and 38%, in FY2024. Says A M Karthik, Senior Vice President &amp; Co-Group Head, Financial Sector Ratings, ICRA, “As bank funds constitute a larger share in the overall funding of NBFCs, a slower credit flow from banks to the NBFCs will compress their AUM growth. The NBFCs in unsecured and digital lending businesses shall face a higher squeeze in funding compared to others, and the unsecured lending space will continue to be a source of stress in the near term.” There has been uninhibited growth in <keyword id="6051027" type="General" weightage="20" keywordseo="Unsecured-loan" source="Orion">unsecured loan</keyword>s, apart from just the microfinance segment. For instance, Axis Bank’s gross slippages jumped by Rs 4,443 crore, largely thanks to its unsecured business. The same is the case with Yes Bank, which saw 35–40% of its retail slippages emerging from the unsecured loan portfolio. <keyword id="6376194" type="General" weightage="20" keywordseo="kotak-mahindra" source="Orion">Kotak Mahindra</keyword> Bank was also quick to follow Yes Bank’s suit, with around 35%-40% of its slippages coming from credit cards. <h2>How is the road ahead?</h2>While RBI has just cracked its whip and served a warning at the moment, experts at Morgan Stanley believe that more changes (read regulatory lashes) are underway. Moreover, with both festive and wedding seasons underway in our country, unsecured lending might pick up momentum, much to the disdain of the calibrated approach banks have been taking towards it so far. But if the situation doesn't improve, RBI will not waste any time in becoming the typical tyrannical <keyword id="19897820" type="General" weightage="20" keywordseo="bollywood" source="keywords">Bollywood</keyword> headmaster who runs his dominion with an iron fist. However, that's a story for another day. Do you have a topic in mind you'd want a simpler explanation for, or insights or personal experience to share on personal finance and more? Contact us at businessinsider@timesinternet.in.

Simply Put: Is the lending party over? The dangerous tango of Indian banks with microfinance and unsecured loans

<ul class="summary-list"><li>JPMorgan and Wells Fargo kick off bank earnings on Friday.</li><li>Expect lots of questions about how lower rates will impact business going forward.</li></ul>When Wall Street's biggest banks report earnings this week, led by JPMorgan Chase, investors will be listening closely for clues about how a changing interest-rate environment could impact business in 2025.The Federal Reserve in September cut the so-called federal funds rate by 50 basis points — <a target="_blank" href="https://markets.businessinsider.com/news/stocks/fed-interest-rate-cut-ai-stocks-nvidia-broadcom-asml-tech-2024-9?_gl=1*1ax8rwf*_ga*MzQwMzI0MDQ1LjE3MjEzMDM4ODI.*_ga_E21CV80ZCZ*MTcyODQ5MTE5OC4yOTAuMS4xNzI4NDkxMjEwLjQ4LjAuMA..">the central bank's first cut</a> in more than four years. The September 18 move took place too late to impact third-quarter results, but stock research analysts are expected to pepper executives this earnings season about what a lower interest-rate environment might mean for business going forward.Lower rates can be a mixed blessing for banks. On the one hand, the Fed's campaign to increase the cost of borrowing has contributed to an era of sky-high returns for traditional lenders like JPMorgan, which have been making more money on loans than they have been paying for deposits. But that party was never going to last forever. (Indeed, top JPMorgan exec <a target="_blank" href="https://www.ft.com/content/c11b59f6-4827-4c4e-9f24-2f075b85f665">Daniel Pinto warned last month</a> that stock analysts' so-called NII expectations were too high.)Plus, lower rates could help unleash <a target="_blank" href="https://www.businessinsider.com/goldman-sachs-2q-earnings-david-solomon-investment-banking-forecast-2024-7">the dealmaking backlog</a> that investment bankers have been talking about since the pandemic-era M&amp;A boom started to slow in 2022. Their bonuses are counting on it.Speaking of bonuses, third-quarter results will also be closely watched on Wall Street as an indication of how well investment bankers may get paid this year.JPMorgan and Wells Fargo will kick off earnings on Friday, followed by Goldman Sachs, Citi, and Bank of America on Tuesday. Morgan Stanley will report its earnings on Wednesday. Here are the top four things to look for this bank earnings season:<h2 id="629d7158-9393-4502-a5a4-b8a898b107c5">Investment banking</h2>Investment bankers have been predicting dealmaking will return since it started slowing in 2022. But this year, there are strong signs that companies are ready to start going public and merging again.<a target="_blank" href="https://www.businessinsider.com/megamergers-deals-m-a-wall-street-comeback-2024-9">Preliminary data compiled by LSEG</a> shows 425 mergers globally so far this year valued at more than $1 billion. That's up 24% from the same period in 2023. What's more, deals valued at greater than $10 billion were recently up 39% compared with the same period last year.The number of companies going public is also soaring. 106 US companies have gone public through the third quarter, raising a total of $24.7 billion, according to IPO tracker Renaissance Capital. That's up from 71 in 2022 and 108 in 2023 and on track to beat the $27 billion raised in those two years.Third-quarter results — and commentary about 4Q dealmaking so far — will be closely watched for further signs of progress in M&amp;A, equity underwriting, and debt underwriting.<h2 id="bf745d80-abee-4488-881c-e8551a17811c">Trading</h2>At the Barclays Financial Services conference in September, big bank executives warned that trading revenues may be muted compared to 2023.Goldman Sachs CEO David Solomon described a "more challenging macro environment, particularly in the month of August," and warned that the bank's trading business "is trending down close to 10%." Solomon cited the bank's revenues for FICC, or fixed-income, currencies and commodities, saying that results were "very, very strong" in the third quarter of 2023.At the same conference, JPMorgan's president and chief operating officer, Daniel Pinto, predicted that trading revenues would be "flat to slightly up 2%." "It was a bit more challenging environment to monetize client flows, particularly in rates," he said.<h2 id="723af9a4-99cc-49fd-b909-2fc736985cbb">Lending</h2>Stock analysts will be watching what banks say about net interest income, which is how much banks earn off the difference between what they pay on deposits and what they earn on loans. When the Fed started raising rates, banks were making out like bandits because they were able to charge more for loans more quickly than they were raising rates on savings accounts.But banks have been warning that this dichotomy wouldn't last forever, and loan growth has indeed been slowing as the economy slows. Lower rates could boost lending yet again, but that could take time. In the meantime, JPMorgan's Pinto in September warned that Wall Street stock analysts' 2025 predictions for NII of between $91.5 billion and $90 billion were too high, sending the bank's stock down."I think that that number will be lower," Pinto said at the Barclays Financial Services conference. "We are not going to guide on that now, but the $90 billion is a bit too high."<h2 id="b126e3af-7e38-4ed0-b6d7-4e67905737f9">Bonuses</h2>Banks tend not to talk about bonuses on earnings calls, but how bankers will be paid will be reflected in C-Suite comments about dealing and trading generally — as well as their predictions for the rest of 2024 and into next year.In good news, compensation expert Johnson Associates sees bonuses up this year across the board, an analysis that's reflective in part of <a target="_blank" href="https://www.osc.ny.gov/press/releases/2024/10/dinapoli-wall-streets-2024-first-half-profits-232b-were-793-higher-last-year">Wall Street's earnings results</a> so far this year. See here for the compensation expert's views on bonuses for debt underwriting, equity underwriting, sales and trading, and more.<div type="image" title="Wall Street bonus predictions" height="630" width="1950" msid="114096916" hostid="261" sizebytes="88820"></div>

4 trends to watch this bank earnings season

<ul class="summary-list"><li>The Federal Reserve delivered on Morgan Stanley's best-case scenario for rate cuts last week.</li><li>Morgan Stanley is now looking ahead at the perfect mixture of conditions for a strong fourth quarter.</li></ul>The Federal Reserve nailed the rate-cut scenario that Morgan Stanley called its <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/best-case-scenario-stock-market-outlook-fed-rate-cut-ms-2024-9">best-case result</a> leading into the decision. Now it's up to the labor market whether the firm can get its ideal fourth-quarter setup.Heading into last week's announcement, Morgan Stanley was looking for a 50-basis-point cut that didn't also stoke worries about unnecessary growth. That ended up playing out, and stocks ripped higher to records the next day.Now, in new research, Morgan Stanley's chief US equity strategist Mike Wilson is outlining what has to take place for a similar strong fourth quarter."A drop in the unemployment rate and strong payroll data (without downward revisions) is likely the most risk-on signal for equities in 4Q," he wrote. "Such a development can counter seasonal weakness in earnings revisions and election-related volatility — 2 important dynamics the market faces over the next month and a half."Job market deterioration was a major factor in the Fed's decision to cut by half a point. In reducing rates this much, the central bank seeks to stave off any potential labor-led slowdown and ensure support for the economy.Incoming payrolls data will gauge its success. With September's figures set for release on October 4th, Morgan Stanley outlined three main outcomes to expect:The best scenario is if unemployment drops below 4.1% and non-farm payrolls reach above 150,000. In this case, the market could see a sustained rotation into cyclical equities as investors take on more risk appetite.Depending on future rate cuts, other benefactors include small caps, industrials, consumer discretionary and housing stocks.The worst-case scenario occurs if unemployment rises above 4.3% and non-farm payrolls fall below 100,000. This would be a risk-off outcome, giving defensive equities the upper hand.Alternatively, the jobs report could stay at current levels. This mixed outcome offers no obvious risk level, though large-cap quality stocks could generally outperform.Bank of America similarly highlighted that labor reports are now the biggest market movers <a target="_blank" href="https://markets.businessinsider.com/news/stocks/stock-market-most-important-daysstock-market-between-now-and-election-2024-9?_gl=1*i7qn1n*_ga*MTMxNDIwNDI1Ni4xNjc1Njg3OTU4*_ga_E21CV80ZCZ*MTcyNzE3OTAwMi42NDQuMC4xNzI3MTc5MDAyLjYwLjAuMA..">ahead of the election</a>. Stock options are pricing in over 1% moves on the S&amp;P 500 for October 4th, in whichever direction.To be sure, job conditions are not the only thing Morgan Stanley is watching. Also of interest are earning revisions, manufacturing data, and the Conference Board Leading Economic Indicators and Employment Trends index."Bottom line, the Fed's larger than expected rate cut can buy more time for high quality stocks to remain expensive and even help lower quality stocks to find some support; however, the labor and other growth data now likely needs to improve in order to justify these conditions through year end," Wilson wrote.

Morgan Stanley outlines the best-case scenario for stocks in the 4th quarter

<ul class="summary-list"><li>American consumers and businesses are having a hard time paying off credit card, auto, and commercial real estate debt.</li><li>US banks have increased their reserves in part to prepare for potential loan losses.</li></ul>US banks are having a harder time <a target="_blank" href="https://www.businessinsider.com/personal-finance/credit-score/what-is-debt-collection">collecting debts</a>, so they're taking precautions.According to Federal Reserve data, the past-due debt share for <a target="_blank" href="https://www.businessinsider.com/paid-off-credit-card-debt-solid-plan-2024-6">credit card</a>, <a target="_blank" href="https://www.businessinsider.com/consumer-credit-card-debt-auto-loans-delinquency-economic-outlook-bofa-2024-9">auto</a>, and <a target="_blank" href="https://www.businessinsider.com/commercial-real-estate-debt-property-losses-mortgage-interest-rates-prices-2024-7">commercial real estate</a> has recently risen to above pre-pandemic levels. The share of debt banks have written off as a loss because they couldn't collect it has also <a target="_blank" class="" href="https://www.federalreserve.gov/releases/chargeoff/chgallsa.htm">ticked up</a>, with the charge-off rate for two of these three loan types the <a target="_blank" class="" href="https://fred.stlouisfed.org/series/CORCCACBS">highest</a> they've been in <a target="_blank" class="" href="https://fred.stlouisfed.org/series/CORCREXFACBS">more than a decade</a>.Business Insider spoke to industry insiders who said this has prompted a response from big banks anticipating a continued increase in bad loans. <a target="_blank" href="https://www.businessinsider.com/largest-banks-us-list">US banks</a> have increased their reserves in recent years, effectively setting aside cash to cover potential loan losses.While it's commonplace for banks to increase their reserves as loan levels rise over time, reserves have started gradually making up a bigger share of total loans at firms like <a target="_blank" href="https://www.wellsfargo.com/assets/pdf/about/investor-relations/earnings/third-quarter-2024-earnings.pdf">Wells Fargo</a>, <a target="_blank" href="https://d1io3yog0oux5.cloudfront.net/_9d388ee07cccbcc3c8dc5bafe2ea4aff/bankofamerica/db/775/10116/webcast_transcript/2024-10-15+BAC+3Q+Earnings+Call_ADA.pdf">Bank of America</a>, <a target="_blank" href="https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/investor-relations/documents/quarterly-earnings/2024/3rd-quarter/6bca0e4a-703c-4fff-8e70-f026f015fee5.pdf">JPMorgan</a>, and <a target="_blank" class="" href="https://www.citigroup.com/rcs/citigpa/storage/public/Earnings/Q32024/3Q24-SUPP-ForWeb.pdf">Citigroup</a>. Since June 2022, Wells Fargo's and Bank of America's reserves have risen by about $1.8 billion and $2.4 billion respectively. Still, for context, these firms' cash coffers are still considerably lighter than they were during the Great Recession.<h2 id="3bd35426-2903-4a17-860b-981ba0e86427">America's 3 debt pain points</h2>Each month, the New York Fed <a target="_blank" class="" href="https://www.newyorkfed.org/microeconomics/sce#/debtexp-1">asks</a> roughly 1,300 Americans to estimate the chance they'll be unable to make a minimum debt payment over the next three months. Aside from the pandemic, Americans haven't been this pessimistic since 2017.Consumers' struggles to repay credit card and auto debt suggest that <a target="_blank" href="https://www.businessinsider.com/inflation-september-cpi-consumer-price-index-federal-reserve-interest-rates-2024-10">inflation</a> and <a target="_blank" href="https://www.businessinsider.com/fed-cuts-interest-rates-how-much-september-fomc-powell-inflation-2024-9">interest rates</a>, while moderating in recent months, are still taking a toll on their finances. Additionally, businesses' struggles to pack back commercial real estate debt show that factors like elevated interest rates and the <a target="_blank" href="https://www.businessinsider.com/office-market-interest-rates-commercial-real-estate-federal-reserve-pandemic-2024-9">remote work revolution</a> are still having lingering effects.Here's a closer look at each of the three debt categories:<h3 id="df61242d-618b-4bfb-824d-874b5a53ce4d">Credit card debt</h3>As of the second quarter of this year, more than <a target="_blank" class="" href="https://fred.stlouisfed.org/series/DRCCLACBS">3%</a> of all credit card accounts in the US had past-due balances — up from less than 2% in 2021.The steady uptick in past-due credit card debt over such a short period of time provides some cause for concern, Bruce McClary, a nonprofit credit counselor and senior vice president at the National Foundation for Credit Counseling, told BI."What we are seeing is that people are struggling to repay debt while continuing to use up what is left of their available credit — forcing more people to start falling behind on their payments and into the hands of debt collectors," he said.David Schiff, senior managing director at FTI, told BI that prolonged debt-repayment problems will eventually present a bigger risk to the economy.The increase in reserves raises "real concerns about the softness of certain assets classes — specifically ongoing uncertainty around the commercial real estate market, and increasing worry about the number of revolving credit card customers and their rapidly growing balances," Schiff told BI.<h3 id="2c271636-eeeb-43a1-a28b-b69f0c808b83">Auto debt</h3>A Federal Reserve <a target="_blank" class="" href="https://www.federalreserve.gov/econres/notes/feds-notes/rising-auto-loan-delinquencies-and-high-monthly-payments-20240926.html">report</a> published on September 26 found that auto loan delinquency rates rose "substantially" above pre-pandemic levels by the end of 2023, driven in large part by growth in monthly debt payments.In fact, a growing number of Americans owe more than their cars are worth, according to a <a target="_blank" href="https://affiliate.insider.com?h=76e351eb917843c15c21c91acd7d8e92304c81583e3e5bb129c38093d6e7aff2&amp;postID=67114ad8434c477c23344eb6&amp;postSlug=big-banks-preparing-loan-loss-credit-card-auto-debt-cre-2024-10&amp;site=bi&amp;u=https%3A%2F%2Fwww.edmunds.com%2Findustry%2Fpress%2Fnegative-equity-on-the-rise-the-average-amount-owed-on-upside-down-car-loans-hit-an-all-time-high-in-q3-2024-according-to-edmunds.html%3Futm_source%3Dsubstack%26utm_medium%3Demail">report</a> published on October 15 by the automotive website Edmunds. Stephen Biggar, director of financial services research at Argus Research, told Business Insider that if a bank is forced to repossess such a vehicle, the car's value wouldn't even cover the loan, resulting in losses to the bank. He said that the uptick in auto delinquencies is "not a spike, but is kind of a concern about what goes on from here."<h3 id="108a8464-8ec8-4eb3-8b19-f2eb7af18b2d">Commercial real estate</h3>Another problem for banks is that some businesses with commercial real estate loans are struggling to repay them. Biggar said some of this is tied to high vacancy rates among offices. While many companies have called employees back to the office since the height of the pandemic, office vacancy rates still <a target="_blank" href="https://www.axios.com/2024/07/09/office-vacancy-rate-record-high">rose</a> to <a target="_blank" href="https://www.businessinsider.com/real-estate-outlook-office-buildings-vacancies-commerical-markets-investors-remote-2024-1">record highs</a> over the past year.Elevated interest rates have also made it difficult for businesses to pay back debt on commercial real estate loans related to offices, retail, hotel, and apartment building properties, among others. That's because some loans are coming due — forcing businesses to refinance at <a target="_blank" href="https://www.businessinsider.com/commercial-real-estate-big-trouble-crash-bank-crisis-2024-2">much higher interest rates</a>.To be sure, we're still far from a debt crisis: The share of past-due and charged-off debt generally remains in line with historical levels after rising from pandemic-era lows. Additionally, some banks are simply restoring reserves that were depleted during the pandemic. However, if the <a target="_blank" class="" href="https://www.businessinsider.com/recession-outlook-economy-layoffs-inflation-spending-job-market-tariffs-morgan-stanley-2024-10">economy slows</a> and the <a target="_blank" class="" href="https://www.businessinsider.com/job-market-recession-unemployment-rate-september-payrolls-report-fed-cuts-2024-10">unemployment rate</a> rises further, the uptick in delinquencies could become a larger concern, Biggar said.<h2 id="3723386c-1711-4911-97f5-b3d9337f3327">Wall Street acknowledgement</h2>While <a target="_blank" href="https://www.businessinsider.com/wall-street-banks-earnings-calls-interest-rates-fed-cuts-debt-2024-10">banking executives</a> this earnings season generally spoke highly of the economy, they did acknowledge that elevated prices and interest rates continue to weigh on American consumers."Our customers are healthy, but more discerning in their spend with signs of stress isolated," <a target="_blank" class="" href="https://www.fool.com/earnings/call-transcripts/2024/10/15/citigroup-c-q3-2024-earnings-call-transcript/">said</a> Jane Fraser, Citi's CEO, referring to consumers with lower credit scores.Brian Moynihan, Bank of America's CEO, <a target="_blank" href="https://www.fool.com/earnings/call-transcripts/2024/10/15/bank-of-america-bac-q3-2024-earnings-call-transcri/">said</a> that overall consumer spending remains strong but that "consumers are worried of the cost of living, worried about higher rates, and other matters."Charles Scharf, Wells Fargo's CEO, <a target="_blank" class="" href="https://www.fool.com/earnings/call-transcripts/2024/10/11/wells-fargo-wfc-q3-2024-earnings-call-transcript/">said</a> the bank hasn't seen "meaningful changes" in delinquency rates across its credit portfolio, but that there is evidence of financial strain among some Americans."We continue to see more pronounced stress in certain customer segments with lower deposit and asset levels where inflation has partially offset strong employment and wage growth," he said.Jeremy Barnum, JPMorgan's CFO, <a target="_blank" class="" href="https://www.fool.com/earnings/call-transcripts/2024/10/11/jpmorgan-chase-jpm-q3-2024-earnings-call-transcrip/">said</a> that consumers' discretionary spending has "normalized" following particularly strong levels in recent years.The financial roller coaster of pandemic payments, whipsawing inflation, and high interest rates are especially affecting lower-income Americans."We know consumers at a certain income level and below are strapped," Biggar said, adding, "There's been a lot of concern, particularly at the lower income category, that people are unable to make ends meet."Going forward, Biggar said that many banks could continue adding to their reserves, particularly if the unemployment rate rises further. That might not ultimately be necessary, since the jobless rate has <a target="_blank" href="https://fred.stlouisfed.org/series/UNRATE">stabilized</a> over the past two months after a surprise increase."I'm not expecting any big spike from here unless the unemployment rate moves materially higher," Biggar said of further reserve reinforcements.

Big banks are bracing for losses as Americans struggle to pay off debt

<keyword id="19895282" type="General" weightage="20" keywordseo="mumbai" source="keywords">Mumbai</keyword>, <keyword id="19900482" type="General" weightage="20" keywordseo="icici-bank" source="keywords">ICICI Bank</keyword> on Saturday said its consolidated net profit for the December quarter jumped 25.7 per cent to Rs 11,052.60 crore, up from Rs 8,792.42 crore. The second largest private sector lender posted a 23.6 per cent rise in standalone net profit for the third quarter of the current fiscal to Rs 10,272 crore. The bank's core net interest income was up 13.4 per cent to Rs 18,678 crore, on the back of net interest margin narrowing to 4.43 per cent and the domestic advances growth coming at 18.8 per cent. The bank's other income grew 19.8 per cent to Rs 5,975 crore during the reporting quarter. Its provisions came down to Rs 1,049.37 crore from the Rs 2,257.44 crore in the year-ago period, helping the profit growth.

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