Banking Sector Q2 Preview: The Arnig season for the second quarter of FY 2021 has started. The market will be focused mainly on the banking sector. Due to Covid 19 on the banking sector, there was a lot of pressure in the first quarter. Both the market and investors are eyeing recovery in this sector. For now, experts believe that there will be pressure on asset quality and earnings in the second quarter. Right now the focus of the banking sector is going to be on the direction of Post Moratorium Collection and Restructuring. However, the Supreme Court’s order on NPAs has reduced some concerns about NPAs. But provisioning will still remain high.
Banking Sector Q2 Preview
Brokerage house Prabhudas Leeladhar estimates that net interest income could grow at 15 per cent annually in the second quarter. In this, NII growth of private bank is estimated to be 17 percent and that of public banks will be 14 percent. PPOP growth can be 12 per cent (13% private bank, 11% government bank) on an annual basis. PAT growth can also see recovery on an annual basis. The brokerage has placed HDFC Bank, ICICI Bank and Kotak Bank in its top picks. They are expected to get the most from the strong capital base and gains in deposits.
No more hope for loan growth
There is not much expectation from loan growth in the second quarter. During this time it can come down from 6-7% to 5-6% on an annual basis. At the same time, the picture regarding the asset quality is not clear. This will all depend on recovery and loan restructuring after the moratorium.
Core performance projected to be muted
Core performance is expected to be muted in the second quarter. PPOP due to lower treasury gain
It may show 12% growth on an annual basis. At the same time, it may decrease by 3% on a quarterly basis. Due to the low-income activity, the core performance is seen to be weak.
Better position at capital level
The situation is looking better at the capital level. Banks have raised 25000 crores in the second quarter of FY 2021 and 52000 crores in the first half. The capital level of banks is also looking better due to lower capital consumption.
How to create a strategy in bank shares
|Axis Bank||HOLD||Rs 480||Rs 468|
|HDFC Bank||BUY||Rs 1265||Rs 1234|
|ICICI Bank||BUY||Rs 462||Rs 402|
|IndusInd Bank||BUY||Rs 680||Rs 623|
|Kotak Bank||ACCU||Rs 1389||Rs 1320|
|Federal Bank||BUY||Rs 67||Rs 53|
|South Indian Bank||BUY||Rs 11||7 rupees|
|IDFC Bank||SELL||Rs 21||Rs 32|
|Bank of Baroda||BUY||Rs 65||Rs 44|
|PNB||BUY||Rs 40||Rs 29|
|SBI||BUY||Rs 276||Rs 198|
(Advice: Prabhudas Liladhar)
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