In line with commentary from managements of most banks, global brokerage BNP Paribas expects continued strong performance on credit costs for the banking sector as asset quality remains intact. The brokerage is not building on any improvement on cost-to-earnings metrics as it thinks that tech investing should remain a priority across the board and spread improvements have not been dramatic enough to offset the increased costs.
The brokerage house has ‘Buy’ rating on Indian banking stock hdfc bank with target price 2,030 each, ICICI Bank (TP: 1,070), Axis Bank (TP: 1,130), State Bank of India or State Bank Of India (TP: 720), AU Small Finance Bank (TP: 775). Meanwhile, it has acquired IndusInd Bank (TP: 1,260), Kotak Mahindra Bank (TP: 2,020), and City Union Bank (TP: 172).
“With system deposit growth in high single digits y-y, materially lagging credit growth, we expect the majority of deposit growth within our coverage universe to come from term deposits rather than CASA. increased physical fixed deposit rates in 2015 – although leaving behind less prominent names in material terms – and should see greater mobility of fixed deposits in 3QFY23. We expect a small qq increase in margins for most banks, as Changes in debt revaluation and asset mix more than offset cost of funds increases,” the note said.
“Of the banks under our coverage who have made early disclosures on 3QFY23 fundamentals – HDFCB, IIB and AUBANK – none have come as a surprise which necessitates a re-evaluation of our sector stance. AUBANK and IIB show a strong set of numbers that are slightly ahead of expectations, while HDFC Bank disappoints slightly on CASA – 1.4% qq decline in CASA ratio, absolute volumes almost flat – but retail loan growth higher than expected 5 There is a silver lining at %yy,” the BNP added.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
Know your inner investor
Do you have guts of steel or are you a victim of insomnia regarding your investments? Let’s define your investment approach.
catch all business News, market news, breaking news events and breaking news Update on Live Mint. download mint news app To get daily market updates.