In an interview to CNBC-TV18, Darpin Shah, assistant vice president, Institutional Research, HDFC Securities shares his views on Q1 bank earnings and his expectations going ahead.
After Axis Bank posted better-than-expected results, HDFC Securities has upgraded the stock to 'buy' with a target price of Rs 1,570.
Below is the verbatim transcript of Darpin Shah's interview on CNBC-TV18
Q: On Thursday, Kotak Mahindra Bank delivered asset quality pressures but on the flip side Axis Bank was quite stable in terms of its asset quality. How would you rate both those banks now?
A: The Street was waiting for asset quality issues in Axis Bank given the exposure in various riskier assets like infrastructure and power. However, over the period they have managed to diversify their portfolio towards retail, which now form around 29 percent of their portfolio and has been growing on a much healthier side. They have well diversified those portfolios and managed to hold their asset quality very well.
Coming to Kotak Mahindra Bank, we do not have coverage on Kotak but the asset quality has been very much in control for them, there was some spike because of corporate accounts that turned non-performing asset (NPA) this quarter. However, they are still under much manageable control for the bank.
Q: Have you increased your price targets after looking at the numbers?
A: We have upgraded our stock to buy. We had a neutral rating for Axis Bank. Therefore, post the number we have upgraded a buy. Our target price is roughly around Rs 1,570.
Q: What are your top picks in banking space and your top avoids now?
A: The measures which Reserve Bank of India (RBI) has taken and the way things have happened in the last 30-45 days, it is clear that one should stick to private banks. The quality names should be there while public sector undertakings (PSUs) are attractive, there is no major near-term trigger for them to move up again. So, stick to private banks. We prefer Axis Bank, ICICI Bank and IndusInd Bank amongst the private banks.