Angel Broking - Banking - 2QFY2013 Result Review

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Rajesh Desai

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Dec 2, 2012, 12:57:06 AM12/2/12

Dear All,

Forwarding you the Result Analysis on Banking sector for 2QFY2013.

A decelerating economic growth environment, policy woes in select sectors and elevated inflation and interest rates point towards further economic stress and are not suggesting any conclusive trigger for improvement in asset quality in the near-term. Hence, we continue to prefer private banks, given their stronger capital adequacy and growth prospects as well as cyclically better asset quality profile, with Yes Bank, Axis Bank and ICICI Bank being our top picks.

In the back-drop of the near-term environment, in our view, the larger PSU banks like BOB and SBI are better placed. While PSU bank valuations a couple of months back offered bottom-fishing opportunities, after the 20-40% surge in several of these stocks, further upsides in our view would have to be driven by catalysts such as lower re-pricing of high-cost deposits (relative benefit for low-CASA banks) and higher recoveries (relative benefit for banks that have experienced maximum asset quality pain, and importantly, also provided for it already). Screening for these criteria, as well as Tier 1 capital adequacy and trailing adjusted valuations, in our view, PSU banks that would stand to gain most from an eventual cyclical turn-around include Canara Bank and Bank of India in the large-caps as well as Indian Bank, Allahabad Bank and United Bank amongst the mid-caps.

Kindly click on the following link to view the Report.

Banking - 2QFY2013 Result Analysis

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