Prefer select private lenders in banking sector: HSBC
Mumbai: HSBC said that it continues to prefer select private banks based on their superior profitability and growth prospects and ability to gain market share from public sector banks on which it has a cautious view.
The foreign bank counts HDFC Bank and YES Bank among its top picks. The firm has a buy rating on both HDFC Bank and YES Bank with a target price of Rs 1,628 and Rs 1,640 respectively.
The profitability of PSU banks is likely to suffer in the March quarter due to recent rise in bond yields, said HSBC.
HSBC said banks are facing issues of persistent high liquidity but sluggish credit growth. It believes that banks have room to cut deposit rates and lending rates further, thereby becoming more competitive versus non banking financial companies, especially housing and vehicle financiers.
"However, given that the rate differential between bank lending and market instruments is still meaningful at over 100bps (from 200bps earlier), high rated corporates could continue to shift towards the bond markets." said HSBC in a note to clients.
The foreign bank counts HDFC Bank and YES Bank among its top picks. The firm has a buy rating on both HDFC Bank and YES Bank with a target price of Rs 1,628 and Rs 1,640 respectively.
The profitability of PSU banks is likely to suffer in the March quarter due to recent rise in bond yields, said HSBC.
HSBC said banks are facing issues of persistent high liquidity but sluggish credit growth. It believes that banks have room to cut deposit rates and lending rates further, thereby becoming more competitive versus non banking financial companies, especially housing and vehicle financiers.
"However, given that the rate differential between bank lending and market instruments is still meaningful at over 100bps (from 200bps earlier), high rated corporates could continue to shift towards the bond markets." said HSBC in a note to clients.
