Hemindra Hazari of Karvy Stock Broking feels that there have been good performances from banks like Dena Bank and is optimistic on Bank of Baroda, Union Bank and also on Axis bank.

Excerpts from CNBC-TV18’s exclusive interview with Hemindra Hazari:

Q: What’s the Karvy’s official view on State Bank of India post its numbers? We have seen three brokerage reports right now downgrading the stock. What’s your view?

A: There is pressure on asset quality; I think this is for banks like SBI and even other banks which had emphasis retail asset growth and we believe that some of the Non-Performing Assets (NPA) that one is seeing now are coming from the retail space.

Another point of concern is the hike in Cash Reserve Ratio (CRR) - there obviously, the bank’s cost of funding does go up and unfortunately because of the political pressure, they are unable to increase their lending rates and this is what we are seeing in SBI and most of the other government banks - the Net Interest Margin (NIM) in Q4 has come under pressure and that is because (1) they have been unable to pass on their increase in higher cost on their funds and (2) by some slowdown in credit growth.

When one moves into Q1 of this financial year, one will find that the increase in CRR - the banks have been prevented from either increase in their lending rates or because of market compulsions reducing their deposit costs. So even in Q1 of this year, one will find some pressure on the core income of banks. Having said all this, one also have to bear in mind that lot of the banks have taken a bad knock on shares prices. But we still believe that there is value in bank stocks and we remain quite positive on SBI, Bank of Baroda, Bank of India and Punjab National Bank because we believe that the valuations that they are trading at today are still compelling enough for additional purchases.

Q: If you will have to rank these banks, one saw fairly decent numbers coming from Bank of India, if I remember right. How would you rank the PSU banks?

A: When one looks at the Q4 results, in my opinion, Bank of India would rank at the top followed by that. One will find that banks like State Bank of India also their broad numbers did positively surprise the market, although there maybe something in the fine prints. One will also seen good performances from banks like Dena Bank and from bank like Bank of Baroda which is yet to report numbers as well as from Union Bank which is also to report numbers.

Q: Any thoughts on the private banking space. You don’t track most of them?

A: We do track Axis Bank and we remain quite positive on that bank; they had strong set of Q4 numbers. So we are quite positive on Axis Bank going forward.