Private sector banks to outperform: Ajay Srivastava

Ajay Srivastava, Dimensions Consulting Pvt. Ltd, in an interview with ET Now talks about banking outlook.

After SBI numbers, is there every reason to believe that HDFC Bank or an ICICI Bank in the near term will continue to outperform?

Of course yes, absolutely. In our firm belief that for the next 12-18 months, the private sector banks are clearly going to outperform. If you look at the last 6-8 months, most nationalised banks have been down by almost 30-40% in their stock price, roughly speaking, some are more, some are less. We expect the same weakness to continue in the next 12 months. The NPA problem has not gone away. It is going to get worsen and as we get closer to the national elections in about 15 months from now, we believe the lending would go up from these banks. These banks are running out of capital as you saw SBI is almost out of capital, so they need to go and raise money in the market, so there will be more money required. Their loans are not performing. Interest rate scenario tells us that there is a direct linkage between interest rate and NPA in all business cycles of this country, which is bound to happen. Rural lending has been at its peak for since the last 80000 crores write-off, so you may see a big write-off coming on our way. In fact the gap is going to widen not lessen.