Banking Downgrade earnings and TP; sector view cautious n Emkay

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Banking

Downgrade earnings and TP; sector view cautious

n     RBI hikes the Repo rate by 50bps to 7.25% and accordingly the reverse repo rate stands adjusted at 6.25% and MSF rate (Marginal Standing Facility) at 8.25%

n     Inflation remains a key concern and will continue to be the driving factor in formulating monetary policy. Inflation control at the cost of some growth to take precedence

n     Increased interest on saving bank deposit by 50bps to 4% along with higher provision on various categories of NPAs and restructured assets

n     Downgrade earnings estimates by 3-15% for FY12E taking 6-10bps more dip in NIMs and higher provisions. Downgrade target prices by 4-14%. Downgrade sector view to cautious