Edelweiss Securities expects private banks to deliver 16/14% growth in NII/PAT for Q4FY14, while for SOE banks, it is expected at 17/(0.9)%, respectively. Challenging business environment will reflect in lower credit growth and elevated credit costs.
''Earnings growth for SOE banks is expected to be soft due to sticky staff expenses and higher provisioning, though partially offset by improved treasury performance (more so on equity portfolio) and higher other income following sale to ARCs.'' it said.
''Slippages are likely to throw stabilizing/improving trend, but restructuring may spring some negative surprise. Additionally, sale to ARCs by few banks may keep headline asset quality numbers in check. Private banks on the other hand are expected to deliver steady quarter, led by benign asset quality and stable to improving NIMs.''
''Over past two months, we have seen strong revival of foreign fund flows and buoyant equity markets riding on belief of green shoots emerging for pick up in industrial activity. However, our interaction with managements suggests that not much comfort lies in ground level activity with large expectation of slow and gradual economic recovery, which might keep asset quality improvement at bay for next two-three quarters,'' said Edelweiss Securities.
''We believe private banks would fare well due to better risk management practices, strong liabilities traction (well set to capture growth phase) and strong capital position. We continue to prefer large cap private banks - Axis Bank, ICICI Bank,'' the broking firm opined.
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