Banks posted strong results but profitability may be at a peak, says Emkay Global's Karwa

Emkay Global's Krishna Kumar Karwa

Despite impressive results and upbeat performance of some banks, earnings upgrades across the board have been few and far between, said Emkay Global's managing director Krishna Kumar Karwa.

This suggests that while the overall banking sector has recovered from lows in the last 30-45 days, there may still be some room for improvement in terms of earnings.

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“Numbers have been very good for banks and banks have recovered from their lows in the last 30-45 days but in terms of valuation multiples, will we see an expansion of further valuation multiples or are most banks getting into a territory where they could be earnings compounders?," Karwa told CNBC TV18 in an interview.

"I have not seen too many earnings upgrades across the board,” he mentioned.

HDFC Bank and ICICI Bank posted upbeat numbers in Q4FY23. HDFC Bank on April 15 reported a 21 percent YoY rise in consolidated net profit to Rs 12,594.5 crore for the quarter ended March 31. The private lender posted a 20.3 percent YoY growth in consolidated net revenue.

Meanwhile, ICICI Bank clocked nearly 30 percent year-on-year jump in net profit to Rs 9,121.9 crore for the quarter ended March 2023.

Talking about the auto sector, Karwa is of the view that in the two-wheeler space, the 'massive replacement cycle' is picking up and also sees the segment to deliver good numbers.

While Karwa expects strong numbers from passenger vehicles on the back of new product launches, he anticipates a slowdown in terms of commercial vehicles.

He also added the insurance space has been in a stagnation mode for nearly three to four years now but with attractive valuations; suggesting that one investor could look to invest in the space from a two to three-year perspective.