Indian Banking - Loan Growth Remains Robust - Motilal Oswal

INDIAN BANKING: Loan growth remains robust at 23.9%, CD ratio continues to be high at 75.1%

Loan growth improved to 23.9% YoY vs 23.2% a fortnight earlier. Loans in absolute terms increased by Rs493b during the fortnight vs Rs153b a fortnight ago.

Deposits in absolute terms grew by Rs588b (vs Rs377b a fortnight ago; rising rates leading to higher deposit mobilisation); deposit growth increased to 16.9%.

SLR investments decreased by Rs103b during the fortnight. SLR ratio stands at 26.8% vs 27.3% a quarter ago.

While macro headwinds prevail, our economist expects improvement in liquidity from April 2011. Higher interest rates will accelerate deposits mobilization.

Moderation in margins is likely to be compensated by operating leverage and fall in credit cost. We expect return ratios to remain strong. Among the large cap banks our top bets are SBI, ICICI bank, PNB and Canara bank. In mid cap space we like Yes Bank, IndusInd, OBC and Andhra bank.

Source : Equity Bulls

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