Banking
YoY loan growth for Sep'10 expected to moderate from Jun'10 levels
We expect banks within our coverage universe to clock loan book growth ahead of
20% - marginally ahead of the system. Although we expect the reported YoY
business growth to moderate for all banks without exception, we expect Bank of
Baroda and Axis Bank among the larger banks to outperform the rest of our
coverage universe in terms of loan book growth.
Margin outlook
We expect margins to remain range-bound with downward bias on a sequential
basis (although margins will appear superior on YoY basis). The dual benefit on
the margins front would accrue as a result of a combination of three factors: (a)
mobilization of funds at a lower pace (deposit growth as a proxy); (b) fag end of
deposit-side re-pricing to offset recent deposit rate hikes; and (c) lending rate
hikes mid-way through the quarter.
Six large banks (5 public sector banks and ICICI Bank) from within our coverage
universe had effected lending rate hikes (of between 50bps and 75bps) mid-way
through the quarter. We expect benefits from deposit-side re-pricing to be on its
last leg this quarter, although such re-pricing benefit may partially offset recent
deposit rate hikes undertaken in the quarter.
Asset quality outlook
Given our interaction with leading south-based PSU banks last month, we expect
this quarter to be a flashpoint in terms of NPA accretion, especially from the stock
of restructured assets across select banks (from within as well as outside of our
coverage universe). We believe that Andhra Bank and Axis Bank are especially
vulnerable from an asset quality perspective this quarter from within our coverage
universe - we envisage a similar risk for Indian Bank, Indian Overseas Bank, ING
Vysya Bank and UCO Bank from outside of our coverage universe.
Our top picks are Union Bank and Andhra Bank.
No comments:
Post a Comment