Gautam Sinha Roy, Motilal Oswal is bullish on ICICI Bank, HDFC Bank, Yes Bank and IndusInd Bank at current levels.
Roy told CNBC-TV18, “In the results we have seen that disparity between private banks and PSU banks especially in terms of performance on asset quality continuing and in fact expanding. So, on the one hand if you see the earnings growth of private banks and some of non banking financial companies (NBFCs) they continue to be very strong.”
He further added, “We are bullish on some of the names there like ICICI Bank, even HDFC Bank at current levels, Yes Bank, IndusInd Bank on the mid-cap side which we like. On the PSU bank side I agree that results have been a disappointment especially on the NPA formation front too. In the system we are seeing lower growth as well as continued NPA formation which is definitely negative from a results perspective but we continue to believe in the hypothesis that PSU banks are a better play on the economic recovery which we are building in, coming in from FY14 if we see we expect gross domestic product (GDP) growth and corporate earnings to accelerate meaningfully in the coming years. So, that would imply that some of the bad loans that have been formed for the PSU banks would convert into good loans and also will see general macro economic growth based recovery in their loan book. So, that should imply that these banks profits grow super normally.”
“If one looks at the valuations this is probably one set of banks, PSU banks among all companies, all sectors this is one set which is still trading at below its long-term average. So, that is another valuation support that we have there. So, we think from a recovery perspective these continue to be very good plays but we haven’t seen the numbers yet so that definitely is true.”