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Bank stocks are likely to trade in a narrow range next week in line with the overall market, with stock-specific cues emerging from smaller private banks that will report their Jan-Mar earnings. The banking index has noticeable call base at 11500. A close above these levels may trigger short covering in the banking index. Otherwise, the index may slip towards 11200/11000 levels. Development Credit Bank kick started the earnings season for banks yesterday with a near 100% on year rise in profits for Jan-Mar. YES Bank and IndusInd Bank will be announcing their earnings on Wednesday and Thursday, respectively. Private sector banks, both smaller and larger entities, are widely expected to outperform their state-owned peers in terms of profitability and asset quality, but state-owned banks may report larger credit expansion in the final quarter. We expects private banks to grow faster than state-owned banks in Jan-Mar, and ICICI Bank as top picks in the sector.
State-owned banks tend to expand their balance sheets and asset books with short-term deposits in the last fortnight of the financial year in a bid to show significant growth to their investors. The last-minute bulking up of the loan books also helps state-owned banks depress their non-performing asset ratios, which are calculated as a percentage of the total loan book. Most PSU (public-sector undertaking) banks are expected to witness strong credit expansion on quarter-on-quarter basis due to year-end rush to shore-up balance sheet. However, their loan growth for the year is likely to be modest reflecting the weak corporate credit demand especially related to new investments and also slower disbursements on existing project loans.
HDFC Securities also expects better profits and steadier margins for private banks, as state-owned banks reduced their retail loan rates during the quarter-ended Mar 31 but most private players maintained status quo. However, any comments from the Reserve Bank of India on the recent money-laundering allegations against ICICI Bank, HDFC Bank, and Axis Bank may lead to knee-jerk negative reactions in stocks of these lenders. On Thursday, RBI Deputy Governor H.R. Khan said that the central bank was initiating action against the three private banks that were alleged to be providing money laundering services in a sting operation conducted by online portal cobrapost. Dena Bank's improving profitability profile along with stable asset quality has helped it historically to achieve Return on Assets of 1% and Return on Equity of 19%. It has consistently delivered on performance by improving core operating metrics. Going ahead, it expects sequentially lower slippages, stronger upgrades/recoveries and deceleration in restructuring to continue.
Bank stocks are likely to trade in a narrow range next week in line with the overall market, with stock-specific cues emerging from smaller private banks that will report their Jan-Mar earnings. The banking index has noticeable call base at 11500. A close above these levels may trigger short covering in the banking index. Otherwise, the index may slip towards 11200/11000 levels. Development Credit Bank kick started the earnings season for banks yesterday with a near 100% on year rise in profits for Jan-Mar. YES Bank and IndusInd Bank will be announcing their earnings on Wednesday and Thursday, respectively. Private sector banks, both smaller and larger entities, are widely expected to outperform their state-owned peers in terms of profitability and asset quality, but state-owned banks may report larger credit expansion in the final quarter. We expects private banks to grow faster than state-owned banks in Jan-Mar, and ICICI Bank as top picks in the sector.
State-owned banks tend to expand their balance sheets and asset books with short-term deposits in the last fortnight of the financial year in a bid to show significant growth to their investors. The last-minute bulking up of the loan books also helps state-owned banks depress their non-performing asset ratios, which are calculated as a percentage of the total loan book. Most PSU (public-sector undertaking) banks are expected to witness strong credit expansion on quarter-on-quarter basis due to year-end rush to shore-up balance sheet. However, their loan growth for the year is likely to be modest reflecting the weak corporate credit demand especially related to new investments and also slower disbursements on existing project loans.
HDFC Securities also expects better profits and steadier margins for private banks, as state-owned banks reduced their retail loan rates during the quarter-ended Mar 31 but most private players maintained status quo. However, any comments from the Reserve Bank of India on the recent money-laundering allegations against ICICI Bank, HDFC Bank, and Axis Bank may lead to knee-jerk negative reactions in stocks of these lenders. On Thursday, RBI Deputy Governor H.R. Khan said that the central bank was initiating action against the three private banks that were alleged to be providing money laundering services in a sting operation conducted by online portal cobrapost. Dena Bank's improving profitability profile along with stable asset quality has helped it historically to achieve Return on Assets of 1% and Return on Equity of 19%. It has consistently delivered on performance by improving core operating metrics. Going ahead, it expects sequentially lower slippages, stronger upgrades/recoveries and deceleration in restructuring to continue.
