We are coming out of two years of subdued earnings: Lalitabh Srivastava, Sharekhan
The performance would start to look much improved in H1 of FY20, says Srivastava.
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We expect elevated slippages to start trending down from Q4, said Lalitabh Srivastava, AVP research, Sharekhan, in an interview with ETNOW.
Edited excerpts:
What do you believe will be the key feature when it comes to bank earnings? Do you see normalisation of profit growth?
Yes, our sense is also that in this quarter, we will see the continuation of the trend of normalisation of credit cost with corporate banks. They are not at normal levels still but the trend is definitely going down. Our expectation would be that Q4 would be one quarter where the elevated slippages would start trending down. The important thing is to look at how the recoveries are panning out.
Our sense is that the recovery should continue to be healthy and that should be a positive sign as well for corporate banks earnings. We are coming off a period of two years wherein the earnings were largely subdued because of high credit cost, high provision requirements and banks also increasingly moving towards a cautious stance. On a low base effect, we can see much better performance in Q4 and the performance would also start to look much improved in H1 FY20.
Most brokerages are saying financials are driving performance single-handedly. Corporate banks could in fact lead all the growth that we see on Nifty. How far have they come in terms of performance?
Banks would be tracking something like the recovery pace, and how the credit cost is moderating. There are some green shoots available that will not be seen across the sector but on the frontline banks, you would see some credit pick up beginning. These would be important indicators to look at.
Where do you expect to see some strong earnings growth?
Edited excerpts:
What do you believe will be the key feature when it comes to bank earnings? Do you see normalisation of profit growth?
Yes, our sense is also that in this quarter, we will see the continuation of the trend of normalisation of credit cost with corporate banks. They are not at normal levels still but the trend is definitely going down. Our expectation would be that Q4 would be one quarter where the elevated slippages would start trending down. The important thing is to look at how the recoveries are panning out.
Our sense is that the recovery should continue to be healthy and that should be a positive sign as well for corporate banks earnings. We are coming off a period of two years wherein the earnings were largely subdued because of high credit cost, high provision requirements and banks also increasingly moving towards a cautious stance. On a low base effect, we can see much better performance in Q4 and the performance would also start to look much improved in H1 FY20.
Most brokerages are saying financials are driving performance single-handedly. Corporate banks could in fact lead all the growth that we see on Nifty. How far have they come in terms of performance?
Banks would be tracking something like the recovery pace, and how the credit cost is moderating. There are some green shoots available that will not be seen across the sector but on the frontline banks, you would see some credit pick up beginning. These would be important indicators to look at.
Where do you expect to see some strong earnings growth?
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For this quarter, for banking stocks we would be looking at ICICI, Axis, HDFC Bank. They should be some of the strong performers. For long-term investment picks, we would like to add names like Yes Bank, RBL Bank as well in the list. We would also believe that Axis and ICICI are two of the important banks which can have a strong run going forward in next two years or so. So these are our picks as of now.Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
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