Better numbers expected for large-cap banks: Gaurang Shah

In a chat with ET Now, Gaurang Shah, Asst VP, Geojit BNP Paribas Financial Services, gives his views on the banking space. Excerpts:

I notice you have a DCB, a Bank of India, and PFC also. Are you betting on the interest rates or are you betting that the spreads for these guys, which is the rate of their borrowing and lending, will increase or just that the overall growth of credit is so strong that they all benefit?

Firstly, the spreads are going to increase. Secondly, the most important factor is that the asset quality, which was deteriorating, has shown a little bit of recovery because most of these liabilities and non-performing assets have actually turned into much more better shape. So we feel that the provisions that the banks had to made earlier has gone down to a certain extent. Of course, this may not happen overnight, it is going to take a while, but from a one-year time horizon is where I have mentioned certain stocks that I have recommended over here.

We feel on a conservative basis at least 20-25% upside you will definitely see and the fact that as a broking house, Geojit BNP Paribas believes that in the second part of 2010 and the first half of 2011, you are going to see significant improvement in terms of offtake of loans and of course margins, which will translate directly into better numbers for most of these large-cap banks and of course not to forget the small-cap banks.