Bank Stocks Outlook
for the week – 06 to 09.09.2016
Eased infra project
norms to keep bias positive
( www.rupeedesk.in )
Next week, stocks of banks are expected to extend this
week's gains, which were fuelled by easing of
norms for stalled infrastructure projects. Sharp gains,
however, are unlikely, as investors may look to
book profits. Any commentary from Urjit Patel, who is set
take over as governor of the Reserve Bank
of India next week, may also influence bank stocks. Outgoing
RBI Governor Raghuram Rajan has
kept March 2017 as the deadline for banks to clean up their
balance sheets. Following the central
bank's asset quality review, Rajan had said that banks have
improved recognition of stressed loans
and provisioning requirements.
Indian Overseas Bank will be in focus, as the government is
expected to appoint a managing director
and chief executive officer for the lender. The post has
been vacant since R. Koteeswaran retired in
June, after the completion of his term. With gross
non-performing assets at 20.48%, Indian Overseas
Bank has the highest number of bad loans. Market
participants will track the appointment of the new
chief to gauge the roadmap of reducing stressed loans.
Gains in public sector banks are likely to be led by State
Bank of India and Bank of Baroda, while
Kotak Mahindra Bank, YES Bank and HDFC Bank are likely to
lead the private sector pack. On the
whole, we estimate that small/mid-size private banks can
comfortably grow their loan book ahead of
industry at 28-30% over the next few years.