In an interview to CNBC-TV18, Abhishek Kothari, banking analyst, Quant Broking shares his views on the banking space, and how the companies fare against each other.
Below is the verbatim transcript of Abhishek Kothari's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: Do you have any buys left in the public sector undertaking (PSU) banking space?
A: There are certainly buys left in the PSU space on the longer horizon but in the near-term, there can be pressure on earnings front because Bank of Baroda and ICICI Bank both have guided for further stressed asset addition in Q4 and Q1. So there will not be respite immediately in terms of asset quality for both the banks.
Latha: ICICI Bank has run up a goodish bit, what is the view specifically on ICICI Bank?
A: ICICI Bank is still a buy because capital consumption rate is lower over there and they have capital for two-three years kind of growth. So overall, I feel ICICI Bank is still a buy whereas I will be cautious with Bank of Baroda given the fact that now earning downgrades can be seen and numbers can be revised on the lower side for Bank of Baroda.
Sonia: It is quite worrying to know that stress loan concerns have risen so much for private sector banks, do you think it is just ICICI Bank specific or would you extend it to other private sector banks like Axis Bank, Kotak Bank etc?
A: ICICI Bank had a loan growth in the corporate sector between FY11 and FY13, which was not seen with peers like Axis Bank or HDFC Bank or any other bank. They were shifting their focus more towards corporate rather than retail while other bankers were shifting their focus towards retail and the secured products. so that is the reason in a slowdown when people thought that economy will do well and expanded their balance sheet on the corporate front, it has been hurting those banks, which have expanded on corporate front.
Latha: So what are your buys in the private space?
A: ICICI Bank and HDFC Bank continues to be buys. Axis Bank - there is no pressure on the result front but valuations are stretched because of the recent run up.
Latha: What about the non-banking financial companies (NBFC) space now, we saw stress over there as well for instance in MMFSL, how are you looking at that space now, what are your buys?
A: Shriram Transport we have just upgraded the stock to buy, looking at the commercial vehicle financing that has happened between FY11 and FY13 to come up and then mining bans being lifted and infrastructure story of India should drive the demand for CV. So Shriram Transport is good and then you have HDFC and LIC to continue to perform well.
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