Bank Stocks Outlook for the week: 07 - 11.01.2013

www.rupeedesk.in

Bank stocks are likely to be rangebound, tracking the broader market for cues in the coming five sessions. Domestic equities are likely to take cues from global markets and Index of Industrial Production data for November, due on Jan 11. Initial trends for Oct-Dec earnings of the banking sector will be eyed, with IndusInd Bank announcing its results on Wednesday. IndusInd Bank has been a consistent performer on the earnings front but the focus will be on asset quality which has emerged as a key concern for the whole sector. We expects the banking sector to register slower growth of around 11% on year with state-owned banks profits growing just 6% on year. We expects asset quality issues and higher provisioning for restructured assets to continue to exert downward pressure on profitability.

The foreign investor flows have been driving the banking stocks up and I have a feeling that some selling could occur at current levels. If FIIs still continue to invest it is likely to be in a bank like State Bank of India. State-owned banks that had surged sharply over the last few sessions are likely to ease sharply as investors look to exit and book profits. 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 backdrop of the near-term environment, in our view, the larger PSU banks like Bank of Baroda and SBI are better placed.

We expects Federal Bank to perform well over the long term and suggests a hold with a target price of 580 rupees, but recommends short-term profit booking at current levels. We do not see substantial improvement immediately in H2FY13, therefore we suggest investors to book partial profit at current levels and continue to Hold the remaining from a long term perspective.

Bank Stocks Outlook for the week: 24 - 28.12.2012

www.rupeedesk.in

Bank stocks are seen slightly weak in the coming week tracking the market but rollover trend in derivatives ahead of December expiry on Thursday will be eyed. While rollovers so far have not been very high in bank stocks, there is still hope that rollovers could happen early next week due to a shortened trading week on account of Christmas holiday on Tuesday and hopes that some investors may look at rolling over positions to the January contract in expectation of a repo rate cut. At its mid-quarter policy review on Tuesday, the Reserve Bank of India maintained status quo on policy rates and liquidity tools like cash reserve Ratio and Statutory Liquidity Ratio. However, the central bank reiterated its guidance that if inflation continued to trend lower then it could open up space for policy easing in Jan-Mar. Concerns over US fiscal cliff continue to remain due to lack of any significant progress on the issue, and if the uncertainty continues then the market sentiment could turn negative. Despite the recent rally in banking stocks, we continue to be positive on them. However, this time around we are more bullish on select PSU banks wherein either they are posting a steady performance or their worst seems limited. Among large caps, we prefer SBI while in the midcap space we prefer Dena Bank and Development Credit Bank.

Bank Stocks Outlook for the week(17-21.12.2012)

www.rupeedesk.in

Bank stocks are likely to remain volatile in the coming week with the Reserve Bank of India's monetary policy review on Tuesday providing direction to stocks in the sector. Market is hopeful that the RBI will either cut repo rate on Tuesday or provide more clarity on whether it will definitely cut rates at its Jan 29 policy review. Among those betting on a monetary action, 17 expect the RBI to cut the CRR by 25 bps and leave the policy rate untouched. Only one respondent expects the RBI to cut both the repo rate and the CRR by 50 bps.

Bank stocks will benefit from any cues on policy easing or even a liquidity easing step like a further reduction in cash reserve ratio or statutory liquidity ratio that will indicate the RBI's commitment to an easing in monetary policy.

We continue to expect no change in the repo rate by RBI in the December policy, with the first cut of 25 bps likely to come on the next policy date of 29th Jan. However, given the liquidity condition, the RBI could provide another 25 bps easing in the CRR that would infuse 17,500 crore (175 bln rupees) of liquidity into the banking system.

However, concerns persist on whether the RBI may take further action on the sharp jump in non-performing assets and restructured loans of nearly all banks in the system. At its last policy review on Oct 30, the RBI tightened norms on credit data sharing among banks and also raised the provisioning on standard restructured assets by 75 bps to 2.75%.

The high restructured books of public sector banks which have acted as a dampener on investor sentiments do not seem nearly as threatening once we exclude state electricity board and Air India restructuring which is unlikely to slip into non performing asset category. The revision in rating outlook reflects the increased risk posed by current trends in asset quality, with continuing rise in gross non-performing loans and restructured loans pressuring profits and capital. The banks were particularly challenged by the prevailing operating environment, characterised by high inflation and interest rates.

Bank Stocks Outlook for the week (10-14.12.2012)

www.rupeedesk.in

Bank stocks may ease next week on profit booking following the recent rise over the last few sessions,  Likely profit sales in the broad market are also expected to dampen buying interest in bank stocks. Rising concerns over banks' asset quality, especially of state-owned banks, continues to remain a major concern for the market as it will have a detrimental impact not just on profitability but also on capital position for banks.
   
Although private banks like ICICI Bank, HDFC Bank, Axis Bank, YES Bank, Kotak Mahindra Bank and IndusInd Bank are faring better than their public sector peers on this front, their older private counterparts have been facing the brunt of rising non-performing assets.
   
Lakshmi Vilas Bank will remain under the market scanner as the RBI has appointed additional directors to the board in a bid to safeguard the interests of the customers, which has led to speculation on why such a decision has been taken by the central bank. Market is also eyeing news on capital infusion by the government into state - owned banks like State Bank of India, Indian Overseas Bank, Dena Bank and Central Bank of India.

Bank Stocks Outlook for the week (26-30.11.2012)

www.rupeedesk.in

Bank stocks are likely to see a mixed trend with lack of secular direction for scrips in the sector ahead of November derivatives expiry on Thursday. Banking stocks are also likely to take cues from the choppy trend in broader equity markets. However, the general preference for private banks stocks over state-owned lenders will continue as the latter remains plagued by asset quality issues.

We noted that despite functioning in the same economic environment, better risk management practices had helped private banks contain any major
impact on asset quality unlike state-owned peers whose profits had been hit by rising restructuring of loans and surge in non-performing assets.

Going forward, restructuring is expected to increase led by some large-mid corporate accounts under CDR (corporate debt restructuring). Private banks' asset quality is expected to remain healthy due to lower restructured loans, lesser proportion of direct agricultural loans and better risk management.

A senior State Bank of India official today told that the bank was set to restructure loans worth 65 bln rupees between October and March, with 40 bln rupees likely to be recast in the current quarter. On Thursday, Fitch Ratings affirmed the BBB- long-term issuer default rating of State Bank of India, Punjab National Bank and Bank of Baroda, citing expectation of strong government support for these state-owned entities.

However, the rating agency downgraded Canara Bank's viability rating by a notch to bb+, citing its higher lending exposure to infrastructure sector, led by state electricity boards and a weak funding profile. Among smaller lenders, India Ratings maintained a negative ratings watch on Dhanlaxmi Bank on expectations of pressure on its capital base due to weakening asset quality and operating profit performance.

Bank Stocks Outlook for the week (19-23.11.2012)

www.rupeedesk.in

Stocks of public sector banks are likely to trade weak in the coming week as investors are likely to exit on worsening asset quality scenario, while private sector lenders are likely to remain the top picks. There has to be some selling in PSU counters as asset pain is going to stay for a few more quarters.

All major public sector banks have shown asset quality concerns in their Jul-Sep results, underlining the stress in the banking system. Last week, State Bank of India reported a spike in fresh slippages to the tune of 84.95 bln rupees and restructured assets of 46.94 bln rupees in Jul-Sep. Asset quality pressure is increasingly visible at other larger government banks, which have reported higher NPAs in the last two reporting quarters. We believe this trend will continue with the other banks as the effect of the economic slowdown is fully reflected in their asset quality performance.

RBI cuts repo rate earlier than expected in December, banks are likely to benefit significantly as it will boost sentiment and credit offtake will increase. The case for an early rate cut has emerged after the October headline inflation rate fell to a nine-month low of 7.45% in October from 7.81% in September despite increase in diesel prices a month ago.  There is a strong chance for rate cut by RBI and that will help banks.

Thursday, Finance Minister P. Chidambaram said banks have done their best on lending rates and a further reduction would be possible only if the central bank lowers its key policy rates. Chidambaram said though housing and automobile loans have risen sharply after banks cut lending rates over the last few months, there is no such pick-up in loans for consumer goods. Market largely ignored the news of Chidambaram urging the RBI to expedite the process of issuing new banking licences as Governor Subbarao said the RBI will wait for enabling conditions before issuing such licences.

Bank Stocks Outlook for the week (05-09.11.2012)

www.rupeedesk.in

Stocks of most banks are seen firming up in the coming week in line with trend in broad equity markets, with expect eyeing cues from Jul-Sep earnings of key banks like State Bank of India. The focus will also be on stocks of banks like Allahabad Bank, Canara Bank, Andhra Bank, Central Bank of India, Dena Bank, UCO Bank, Corporation Bank that will detail their Jul-Sep results in the coming week. Trends from Jul-Sep earnings for all large private banks like HDFC Bank, ICICI Bank and Axis Bank show improvement in asset quality, while nearly all state-owned banks have shown sharp rise in non-performing loans, which has impacted profits adversely.
   
On Tuesday, SBI Chairman Pratip Chaudhuri said that Jul-Sep asset quality performance for the bank had been better that Apr-Jun, where the bank saw a sharp jump in non-performing assets. Market has already factored in lower growth and higher asset quality deterioration for most banking stocks on account of the weak economic environment, but believes that more surprises like increase in provision for standard recast loans could lead to pressure on bank stocks.
   
On Tuesday, the Reserve Bank of India raised the provision requirement for standard restructured loans by 75 basis points to 2.75%. In an ominous sign, RBI Deputy Governor Anand Sinha indicated that the move was an interim measure and the banking regulator was studying an expert panel report that had suggested 5% provisioning on such restructured loans. Market is eyeing Union Bank of India scrip favorably following strong Jul-Sep results, where it managed to post a 57% jump in net profit.

Bank Stocks Outlook for the week (29.10.2012 - 02.11.2012)

www.rupeedesk.in

Stocks of most banks are seen slightly weak over the next few trading sessions with the market eyeing the Reserve Bank of India's second quarter monetary policy review on Tuesday for cues.Banks' earnings will also determine the movement in stocks. However, the market is expecting at least a cut in Cash Reserve Ratio or Statutory Liquidity Ratio Tuesday, which will boost liquidity and help credit flow to productive sectors. Banks have been seeking a further cut in Cash Reserve Ratio as it increases profitability, reduces cost of funds and enhances margins.

Bank Nifty is seen trending downwards on profit booking if the RBI does not take any measure at all on Tuesday. The focus will also be on stocks of banks like Bank of India, IDBI Bank, Karur Vysya Bank, State Bank of Mysore, State Bank Of Travancore, and State Bank of Bikaner and Jaipur that detail their Jul-Sep results in the coming week. Punjab National Bank, Indian Overseas Bank, and Bank of Baroda have all shown stress on asset quality with guidance for further problems in the future. Among state-owned banks, IDBI Capital Market Services has downgraded Bank of Baroda's stock to hold from buy citing disappointment in Jul-Sep asset quality numbers and the recent uptick in the bank's stock price.

Bank Stocks Outlook for the week for the week(22-26.10.2012)

Stocks of banks are likely to move a narrow range with a positive bias next week on hopes the Reserve Bank of India will slash key rates in its monetary policy review on Oct 30. Action will be stock-specific as several large banks are scheduled to detail their Jul-Sep earnings in the week.. Stock indices are expected to be volatile next week as the October derivatives series expires Thursday.

Bank Nifty futures has been hovering in a narrow range of 11300 to 11680 levels since past ten trading sessions. We are expecting bank index to expire in between this narrow range itself. Large state-owned banks such as Indian Bank, Bank of Baroda, Oriental Bank of Commerce, Indian Overseas Bank, and Punjab National Bank will release their quarterly earnings next week.
   
Bank of Baroda's net profit at 11.86 bln rupees in Jul-Sep, up just 2% from a year ago and 4% sequentially. Growth in the bank's net profit is seen muted because of some stress on its asset quality and interest income. Among private banks, ICICI Bank, YES Bank, and Kotak Mahindra Bank will release their Jul-Sep numbers next week. Federal Bank, Syndicate Bank, Bank of Maharashtra, Punjab & Sind Bank, and United Bank of India are some others whose earnings are due in the coming days.

Wednesday, India's financial markets are closed for Dussehra festival. Most market participants expect the RBI to respond to the government's recent reforms by cutting rates. Some, however, say a rate cut seems unlikely at this point as inflation remains a worry. Due to this uncertainty, stocks of financial companies are likely to remain in a narrow range until the central bank's policy review.

www.rupeedesk.in

Bank Stocks Outlook for the week (08 - 12.10.2012)

Bank stocks are expected to see some profit sales in the coming week with state-owned lenders likely to see selling at every rise. However, the trend will closely tail movements in broad markets, industrial production data and also take cues from Jul-Sep bank earnings. Broad markets are expected to eye cues from a meeting between officials of the government and the Securities and Exchange Board of India on today (Saturday) which will set the tone for Indian equities early next week. In a bid to boost flows into equities, the government and the SEBI are likely to announce some investor-friendly steps. Valuations of state-owned banks are cheap and attractive but continued issues on asset quality and constant concerns surrounding management change linked profitability shocks, are likely to ensure that private banks remain more preferred over PSU banks. Developments on Kingfisher Airlines are also likely to impact the stocks of all banks that have cumulatively lent over 80 bln rupees to the beleaguered airline. The carrier has declared a temporary lockout and has now been served a regulatory notice on why its licence should not be revoked. All banks have declared it as a non-performing asset, but State Bank of India has made a 100% provision for its loan exposure so far. Higher provisions are expected to impact stocks of nearly all banks.

IndusInd Bank will report quarterly earnings on Wednesday and HDFC Bank on Oct 12. We expects state-owned banks to report muted operating profits. A moderate NII growth and a flat performance on the other income front are expected to result in a modest 7.5% year-on-year growth in pre-provisioning profits for PSU banks; while private banks are expected to report healthy performances on the pre-provisioning profit front, with growth of 24.1% on year. However, concerns over asset quality and rising non-performing asset ratio of banks continue to be a cause for concern for all brokerages.

Net non-performing assets of Indian banks may cross 2 trln rupees by Mar 31, up from 1.57 trln rupees as on Jun 30. Existing exposure of banks to poor performing sectors like power, aviation, highways, micro-finance institutions, ports, telecommunication and others have led to high levels of stress assets. Investors in rate sensitive stocks like banks will also eye cues from the Reserve Bank of India's meeting with the finance minister today, and also comments from RBI officials in the coming week. Recent comments from RBI officials have indicated a concern over growth but the central bank's continued focus on inflation has led it to maintain a status quo on policy rates over the last six months. Yesterday, most bank officials sought a further cut in cash reserve ratio from the RBI, while some bank officials favoured a cut in repo rate at the pre-policy consultations with the Indian Banks' Association. The RBI's next policy review is slated for Oct 30.

www.rupeedesk.in

Bank Stocks Outlook for the week: 01.10.2012-05.10.2012

Hopes of improvement in demand for loans following positive investment cues from the industrial sectors and a likely firm movement in broad market are seen keeping bank stocks firm in the coming week. Profit sales in line with the trend in the broad market may, however cap the upside in bank stocks.

With the interest rate environment expected to turn southwards and cost of funds already seen coming down, we believe rate sensitive are expected to be in demand. Also, gradually as the sentiment improves due to government action, we believe 15-16% industry credit growth (versus 17% targeted by RBI) can be a reasonable assumption.

Senior bank officials have indicated that the Reserve Bank of India has been pushing banks to achieve the 17% indicative loan growth target set for the current financial year ending March. We continue to eye cues from the Reserve Bank of India on whether the central bank will be in a position to consider a policy rate cut on Oct 30 or even a further liquidity boosting measure.

The Reserve Bank of India will announce its second quarter review of the monetary policy for 2012-13 (Apr-Mar) on Oct 30. The September inflation numbers will be more important as they will play a part in the RBI's rate decision in its next policy review meeting. We believe that, markets will consolidate and move up in line with further announcements on core reforms, which are now widely anticipated. The government will release wholesale price index-based inflation for September on Oct 15.

Despite strong performance from state-owned bank stocks in recent weeks, investors continue to prefer investing in private banks which have a more consistent track history on asset quality and profitability. One may use corrections to accumulate banking stocks at lower levels for a longer term horizon. We continue to prefer private banks like Yes Bank, City Union Bank on account of earning visibility. In the PSU (public sector unit) space, we prefer Bank of Baroda, Dena Bank and State Bank of India.

The market will also await further clarity on the status of the announcements made by the government on restructuring of state electricity board loans. The benefits of the debt restructuring authorised by the Indian government for the beleaguered Indian state electricity boards will depend on important conditions being met.

www.rupeedesk.in

Bank Stocks Outlook for the week: 17.09.2012 - 21.09.2012

Bank stocks are likely to stay firm in the coming week, after the smart rally seen today. Short covering in PSU (public sector) banking stocks may continue and the Bank Nifty is expected to remain positive till it holds above 10500. In such a scenario, it may test 11000 on the higher side. Bank Nifty surged over 4% as traders covered short positions following the government's move to hike diesel prices.

Market participants believe that yesterday inflation data and the likely impact of diesel prices on inflation in the coming months will leave little room for the Reserve Bank of India to ease policy rates. India's headline inflation rate based on the Wholesale Price Index shot up to a two-month high of 7.55% in August, from 6.87% in July.

The final inflation rate for June was also revised upwards to 7.58% from 7.25% earlier. We see significant revival in headline inflation (range 8.1%-8.4%) in months ahead and retain our full year estimate for headline inflation at 7.8% YoY.

However, they will eye the central bank's remarks on the economy and its stance on inflation.  While we do not anticipate any rate action in the mid-quarter review scheduled for next week, we expect the RBI to cut repo rate by a cumulative of 50 bps in Q3 FY13 (Oct-Dec) and remain on pause thereafter.

www.rupeedesk.in

Bank Stocks Outlook: 10-14.09.2012

Bank stocks are likely to stay firm in this week, though investors may continue to prefer private sector banks over state-owned peers, they prefer private sector banks over state-owned entities on account of better operating performance, profitability and lower asset quality concerns in a challenging environment. We are relatively more bearish than the Street on PSU (public sector undertaking) banks despite their cheap valuations. We expect the private sector banks to have a more table earnings trajectory over the next several quarters than the PSU bankstheir relatively robust asset quality, higher loan loss coverage and heir retail loan orientation. Among state-owned banks, Positive on Bank of Baroda stocks as its operating performance has been sharply better than its peers, but still trades at similar book value. We believe this makes Bank of Baroda a long-term investment candidate, while at the same time it makes sense to trade BoB on the long side, with a short on any other PSU bank

Bank stocks may also stay muted ahead of the Reserve Bank of India's mid-quarter policy review on Sep 17. Investors are likely to avoid big investments in the sector at least until the policy review, although expectations are that RBI will not make any changes in policy rates or liquidity instruments. We believe that the Reserve Bank of India is unlikely to cut its key policy rates in its Mid Quarter Review of Monetary Policy due in September since upside risks to inflation continue to persist in the near-term.

www.rupeedesk.in

Bank Stocks Outlook for the week (27 - 31.08.2012)

Stocks of banks may remain slightly weak, with investors eyeing cues from broad market. The overall mood remains negative for the banking sector as asset quality is set to face pressure in weak economic environment. Any positive cues from the government or broad market are the only key positives that can lead to a reversal in trend for bank stocks. Purchase of stocks of private banks over state-owned banks, which have been facing stress on asset quality and profitability. Out performance by private sector banks on operational performance and asset quality issues are the prime reasons for the growing valuation gap between private and state-owned banks.

While the private sector banks continue to command premium valuation, the PSU (public sector undertaking) banks continue to languish at lower multiple primarily due to asset quality issues. Our top picks in private banking space include - Axis Bank, YES Bank, J&K Bank, ING Vysya Bank, while, we prefer Bank of Baroda and Indian Bank from public sector banks. Any re-rating or revaluing of state-owned banks was likely only after they showed a sustained improvement in asset quality and clear signs of recovery in macroeconomic conditions. Bank is currently maintaining a cautious stance, as it was facing stress in construction equipment, commercial vehicle segment and large corporate segment. Limited loan exposure towards stressed sectors is the only saving grace for Bank of Baroda as tepid loan book growth, rising loan delinquency and a 37% CAGR likely in its restructured loan book over 2012-14 (Apr-Mar) remain key areas of concern.

www.rupeedesk.in

Bank Stocks Outlook for the week (21-24.08.2012)

Stocks of finance companies and banks are expected to move in line with the trend in the market next week. We recommend investors buy shares of private banks. They suggest investors exit stocks of public sector banks at every rise because the asset quality of state-owned banks is deteriorating.

Shares of public sector banks have under-performed those of private banks by 20-25% over the past six months.

We reiterate our cautious stance given concerns of slower economic growth, loan growth, and higher NPLs (non-performing loans). We retain our preference for private banks over PSUs (public sector undertakings) on higher growth, profitability, and relatively better asset quality.

Shares of public sector banks are under pressure also because of their falling rate of return on equity, and their inability to tap the capital market freely due to government holding.

Since PSU banks are not generating enough internal capital and are also constrained in their ability to tap the capital market freely, their Tier-I capital ratios remain low, despite the recent capital infusion by the government. This is a matter of concern since it leaves them with little capital to cover future losses and would also constrain their growth. BRICS Securities has recommended investors buy shares of Axis Bank, ICICI Bank, HDFC Bank, and Bank of Baroda.

www.rupeedesk.in

Bank Stocks Outlook for the week (09 - 13.07.2012)

Bank Stocks Outlook for the week (09 - 13.07.2012)

Stocks of most banks are seen lower in the coming week as investors book profits to take advantage of the rise in stock prices over the last few sessions. Most bank stocks have risen over the last few sessions, but we feel the upside is limited and expect Bank Nifty to ease towards 10,300 levels in the coming week. The rise has been sentiment driven but unless some actual RBI policy action or government policy changes materialise, the rise is unsustainable. However, We expects medium sized state-owned banks like Allahabad Bank, Dena Bank, UCO Bank, Vijaya Bank, Union Bank of India, Indian Overseas Bank, Canara Bank and Bank of India to be positive.

Markets, especially Bank Nifty still has some short positions standing in it and these shorts would lend support in every dip. As downside looks limited in large caps and positive bias and consolidation are two likely probabilities, midcap may catch up with large caps and outperform in near term. Early trends in Apr-Jun earnings will also emerge next week, with IndusInd Bank and HDFC Bank slated to declare their results on Tuesday and Friday, respectively. Apr-Jun is generally a subdued period for bank profits, especially on-quarter, as it coincides with slack loan demand season for the industry. Overall, we do not expect any major surprises in Q1FY13 (lacklustre due to seasonality). While our top large-cap picks are SBI and Axis Bank, we prefer YES Bank among mid-caps from a long-term perspective. Punjab National Bank and Oriental Bank of Commerce on strong asset quality while it sees Union Bank of India report lacklustre numbers.

ann� 5 e � @ two weeks. The company has been aggressively buying its stock at levels around 700 under the ongoing buyback at up to 870 rupees per share and that has supported the counter. However, little upside from current levels in the near term. We believe RIL's core business will show earnings growth starting in 3Q FY13 (Oct-Dec), after three quarters of poor to flat results, but any turnaround will likely be modest, predicated on our projection of only moderate improvement in RIL's refining margin and a bottoming out of petrochemical margins.
er} � e � @ headroom for upside potential following the recent rally in the stock.