Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● Even as RBI remains in the tightening mode and inflation remains
high (real policy rates are still negative 1.6%), over past few weeks,
3M CP and CD rates are down over 100 bp from their recent peaks.
Yield curve that had inverted is now again moving to upward sloping.
● Deposit growth has picked up (18% YoY) on the back of banks
raising deposit rates by 400 bp+ from their lows. Moreover, liquidity
at banks has improved as loan growth has dropped to 21% (from
24.5%). We expect loan growth to further slow down to 18% levels in
FY12 given the visible drop in retail as well as investment activity.
● Consequently, incremental loan-deposit ratio YTD CY11 has
dropped to 53% from 100%+ in CY10. This will not only depress
incremental blended asset yields (as investment yields
but also limit banks ability to undertake further lending rate increases
to match funding costs rise coming on the back of deposit re-pricing.
● We don’t expect this moderation in short rates to result in any
immediate NIM improvement for financials as it accompanies a drop
in loan growth. HDFC Bank, ICICI remain our preferred sector picks.
RBI likely to remain in tightening mode
We expect inflation to remain sticky and believe it is likely to stay at
8% levels till December 2011. Considering which, it is unlikely that
RBI will soften its monetary stance as real policy rates are still
negative 1.6%. Even in the June policy statement, the central bank
maintained it prefers system liquidity to remain in deficit and therefore
a big drop even in the short rates appear unlikely. Also, while deposit
rates are up 500 bp from their lows in real terms, they are still close to
zero versus the historic average of 150 bp
We also believe reform triggers such as granting of new bank
licenses, etc. will be delayed given the lull in overall policy making and
upcoming leadership changes at the central bank.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● Even as RBI remains in the tightening mode and inflation remains
high (real policy rates are still negative 1.6%), over past few weeks,
3M CP and CD rates are down over 100 bp from their recent peaks.
Yield curve that had inverted is now again moving to upward sloping.
● Deposit growth has picked up (18% YoY) on the back of banks
raising deposit rates by 400 bp+ from their lows. Moreover, liquidity
at banks has improved as loan growth has dropped to 21% (from
24.5%). We expect loan growth to further slow down to 18% levels in
FY12 given the visible drop in retail as well as investment activity.
● Consequently, incremental loan-deposit ratio YTD CY11 has
dropped to 53% from 100%+ in CY10. This will not only depress
incremental blended asset yields (as investment yields
but also limit banks ability to undertake further lending rate increases
to match funding costs rise coming on the back of deposit re-pricing.
● We don’t expect this moderation in short rates to result in any
immediate NIM improvement for financials as it accompanies a drop
in loan growth. HDFC Bank, ICICI remain our preferred sector picks.
RBI likely to remain in tightening mode
We expect inflation to remain sticky and believe it is likely to stay at
8% levels till December 2011. Considering which, it is unlikely that
RBI will soften its monetary stance as real policy rates are still
negative 1.6%. Even in the June policy statement, the central bank
maintained it prefers system liquidity to remain in deficit and therefore
a big drop even in the short rates appear unlikely. Also, while deposit
rates are up 500 bp from their lows in real terms, they are still close to
zero versus the historic average of 150 bp
We also believe reform triggers such as granting of new bank
licenses, etc. will be delayed given the lull in overall policy making and
upcoming leadership changes at the central bank.
No comments:
Post a Comment