Ambit remains sellers on all banks under coverage

Mumbai: Ambit Capital has said that it remains a seller on all banks under coverage due to persisting challenges in the sector.

Ambit said the credit growth of Indian banks, which has been steadily slowing since 2010-11, has now fallen to the lowest level among global peers, in part due to demonetisation, which hit the retail segment.

Credit growth of banks is likely to remain subdued at 10-12% compounded annual growth rate over FY18-FY19 as real estate and informal economy will stay under pressure for some time, said Ambit in a note.

Capital expenditure cycle of companies is also unlikely to revive soon, which will affect credit growth of banks, the Mumbai-based brokerage said.

" PSU banks and private sector corporate lenders will struggle to emerge from asset quality woes. Valuations of even the faster growing retail-focused private banks are vulnerable to credit growth challenges of the banking system," it said.

Ambit has a target price of Rs 110 on Punjab National Bank and a target price of Rs 491 on Kotak Mahindra Bank. On IndusInd Bank, the brokerage has a target price of Rs 1,149.