Banks: Mind the funding gap, as liquidity headwinds persist

Banks: Mind the funding gap, as liquidity headwinds persist

Liquidity remains the key constraint. Bank system LDR hit 115% in April as growth in credit again outpaced deposits despite higher deposit rates. With SBV/ State Treasury support nearing practical limits, banks will need to rely more on their own funding capacity. Meanwhile, interest rates are likely to stay elevated in the m-t. We lower credit growth and NIM assumptions, but earnings growth remains solid. Our covered banks are expected to deliver aggregate net profit growth of 14.6%/19.1%/20.5% in FY26-28, respectively, supported by tighter OPEX control and manageable provisioning. We prefer CTG, ACB, and VCB for defensive exposure; TCB, VPB, and HDB for higher-growth, higher-risk exposure; and MBB for a more balanced profile combining resilience and growth; all are rated Buy.