Q3 results: What to expect from banking sector?

15523 Investors following Syndicate Bank. Share this News with them.

0

Like this story, share it with millions of investors on M3

Q3 results: What to expect from banking sector?

In an interview to CNBC-TV18, Vaibhav Agrawal of Angel Broking says, the banking space would continue to see asset quality pressure in the Q3 and in the coming quarters that would accelerate.

Post your opinion here

 

0

Tweet

Share on Tumblr

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ News and Notices about Syndicate Bank See interviews with Syndicate Bank Management See what other Experts & Brokerages are saying about Syndicate Bank See previous Results of Syndicate Bank Syndicate Bank BSE | NSE 29/05/12 Are Mutual Funds betting on Syndicate Bank? Other Stocks in this news Bank of Maharashtra | Central Bank of India | Andhra Bank | Dena Bank | Allahabad Bank | IndusInd Bank |

In an interview to CNBC-TV18, Vaibhav Agrawal of Angel Broking says, the banking space would continue to see asset quality pressure in the Q3 and in the coming quarters that would accelerate.

In the banking sector, Agrawal is bullish on Syndicate Bank and Bank of Maharashtra . However, he is cautious on Central Bank of India , Andhra Bank , Dena Bank and Allahabad Bank .

Below is the edited transcript of the interview with CNBC-TV18's Latha Venkatesh. Also watch the accompanying video.

Q: IndusInd Bank , what are you expecting in terms of Q3 performance? Is all that in the price?

A: IndusInd Bank has been one of the outperformers on the earnings front in the last few quarters. We expect that performance to continue.

On the operating income front, we expect about 20% year on year growth to continue for the bank. Like other private banks, it continues to see better asset quality than the PSU space. So, on the bottom-line front, as well we expect reasonably good numbers at about 25% PAT growth.

The stock is trading at significantly premium valuations to several of its peers. So, we would have a neutral view purely because of expensive valuations that it is trading at right now.

Q: What is your sense on the overall asset quality in the sector? Do you expect a significant deterioration already in Q3 or do you think a lot of that pressure could show up in Q4 as many people are pointing out?

A: Certainly, we would continue to see pressure even in the Q3 and definitely in the coming quarters that would accelerate. So far what we have seen is due to technical reasons such as the switchover to system recognition of NPAs and such things.

But definitely the genuine slippages as well as the quantum of restructuring are likely to be on the higher side in this quarter. In fact restructuring would definitely be one of the numbers to watch out for. Most of the banks have been indicating a large amount would be coming even in this quarter.

Q: You have some interesting buys, stocks that we don't normally speak about. You have got a buy on United Bank and Syndicate Bank. Can you tell us about the stand outperformances that you expect in this quarter, especially in the midcap space?

A: In the midcap space, we are looking quite closely at Syndicate Bank and Bank of Maharashtra. We expect them to deliver good numbers, especially Bank of Maharashtra. In the last quarter, it reported a 50% decline in its net NPAs. We have been in touch with the management and they indicate similarly good asset quality to continue even in this quarter. So, we would expect more than 50% jump in its net profits and expect it to be one of the standout performers in this quarter as well. That is one of our top buys in the midcap PSU space.

Syndicate Bank did see a big jump and slippages last quarter because of CBS recognition of NPAs. But in this quarter it should report significantly better numbers. So that is another stock that we are looking at for atleast this quarter to outperform. So, these are two of the banks in the midcap PSU space that we like right now.

Q: Who would be the laggards?

A: There is a list of smaller midsized PSU banks that we would be quite cautious on, especially including some of the banks are Central Bank of India, Andhra Bank, Dena Bank, to an extent even Allahabad Bank.

We would be quite cautious that they could report significant increase in NPA stress in this quarter and coming quarters. So, those are the stocks where we have a neutral view right now.