Eyeing Q1 Results, Experts Positive About The Banking Sector

With several banks expected to announce their first quarter results in coming days, market experts seem to hold a positive view on large banks in corporate as well as public sector segment. They feel that fall in bond yields will benefit public sector banks.

Romesh Tiwari, Head of Research, CapitalAim, said expectations about the forthcoming results of big banks are quite positive and there may be an increase in Net Interest Income on quarter-on-quarter as well year-on-year basis.

“We have seen an increase in Net Interest Income in recently declared results of IndusInd Bank, City Union Bank, J & K Bank, IDFC First Bank and some decline in a few small banks. Fall in bond yields will benefit public sector banks especially SBI, PNB with treasury gains and help to raise more capital for lending into new productive projects,” said Tiwari.

He further added, that concerns over bad loans are likely to subside in next quarters and improvement in asset quality and loan book will contribute to strong fundamentals to power up the recovery from sluggish credit growth and capex projects since last few years.

“Overall we are positive on big corporate banks and large public sector banks for next quarter after results. IndusInd Bank, SBI, HDFC Bank, Axis Bank, Yes Bank, and PNB can be bought for mid to long term on declines,” confirmed Tiwari.

Commenting on the same, Amit Gupta, CEO, and Co-Founder, TradingBells, said, that on the overall banking space, the loan growth is likely to remain stable at around 12% while treasury income should rise due to a sharp fall in bond yields. 

“This benefit of a fall in bond yields will continue to be seen in the next quarter as well. The downtrend in slippages will continue but a spike may be seen in stressed assets due to the DHFL issue,” added Gupta.

Talking about particular banks, Gupta adds that “big boy” HDFC Bank and Kotak Bank may continue their stable performance, whereas the pain will be visible in IndusInd Bank, Yesbank and some of the PSU Banks due to the recent NBFC crisis.

“SBI might be an outlier in the PSU Banking space whereas Axis Bank will continue to witness strong shows,” he says.

According to Mustafa Nadeem, CEO, Epic Research, banking space is now the torchbearer for the Bull Run and the portfolios have now become concentrated to this space. 

“We believe this space will continue to perform and see good earnings in Q1 in select banks. As we are seeing normalization in slippages while the Net Interest Income continues to be steady with improvement in asset quality. We are going to see better numbers on the back of declining GNPA while also marginal improvement in credit growth which is seen picking up. This makes banking space lucrative from an investment perspective and will continue to perform in FY20,” concluded Nadeem.