UBS’s Top Picks: SBI, ICICI, and Axis Banks

UBS picks SBI, ICICI and Axis Bank

UBS expects there to be 25-50 point growth in Q1 and expects the banks to report about the muted loans’ growth.

Before the start of the earnings season, unsecured loans and loans against property were said to be the most important products to sell to increase the revenue for the private sector banks according to the brokerage. UBS’s Top Picks: SBI, ICICI, and Axis Banks

The brokerage prefers banks with higher provision buffers and has a buy rating on SBI, ICICI Bank, and Axis Bank.

It has a sell rating on Kotak Mahindra Bank and Punjab National Bank, as it prefers them the least. They are on even ground when it comes to Induslnd Bank, HDFC Bank, Federal Bank, and Bank of Baroda.

It expects a gradual recovery in economic growth but the slowdown will affect the bank’s businesses. There can be loss of credit, increase the risk of NPLs, impact fee income, and exert pressure on NIM.

Competition from other financial savings products such as mutual funds and insurance could slow deposit accretion of banks and could lead to intense competition between banks which would put pressure on margins of banks growing loans faster in the industry, noted the brokerage.

The UBS reported that the provisions could be higher if the economic slowdown continues due to covid-19 and there is an extension in the NPL resolution process, then haircuts could cost higher than the current estimates.

 

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