Motilal Oswal Securities bets big on these 4 bank stocks; except PNB, sees profit revival in all PSU banks

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Published: July 9, 2018 1:26:18 PM

As first-quarter corporate earnings season for FY19 has begun with big blue-chips TCS, IndusInd Bank and Infosys lined up with their respective Q1 results in this week, Motilal Oswal Securities is betting big on four banks and is expecting profit revival in all PSU banks except PNB.

Motilal Oswal Securities has said that value migration from PSU banks to private banks will continue and emerging private banks will be the biggest beneficiaries. (Image: PTI)

As first-quarter corporate earnings season for FY19 has begun with big blue-chips TCS, IndusInd Bank and Infosys lined up with their respective Q1 results in this week, Motilal Oswal Securities is betting big on four banks and is expecting profit revival in all PSU banks except PNB. The domestic research and brokerage firm Motilal Oswal Securities has said that an earnings growth will be seen in the banks on a sequential basis but there would be no significant appreciation on a yearly basis.

“Profitability is likely to improve sequentially, aided by a benign base, as 4Q FY18 earnings were dragged by multiple headwinds from revised framework-related slippages, MTM provisions and enhanced gratuity provisions,” Motilal Oswal Securities said in a report. In the preceding quarter (Q4 FY18), banking sector went into deep losses with big PSU bank such as SBI and PNB reporting highest ever quarterly losses. The earnings dip wasn’t limited to PSU banks only, as the giant private sector lender Axis Bank posted its first-ever quarterly loss since listing.

“We expect private banks to report 3.1% YoY growth (27.4% YoY growth excluding ICICI Bank and Axis Bank; mid-sized private banks to report ~25% YoY growth) while PSU banks are expected to return to profitability (with the exception of PNB,” Motilal Oswal Securities said further.

Ahead of the Q1 FY19 results, Motilal Oswal Securities has given a ‘buy’ rating to Yes Bank, ICICI Bank, RBL Bank and SBI. Shares of all these banks traded in green up until 1:10 pm on Monday with the stock of Yes Bank emerging as the biggest gainers. Motilal Oswal Securities has said that value migration from PSU banks to private banks will continue and emerging private banks will be the biggest beneficiaries.

Shares of Yes Bank rose 3.3% to Rs 364.25, SBI surged 2.02% to Rs 262.4, ICICI Bank added 1.54% to Rs 274.7 while the stock of RBL Bank went up by 1.36% to Rs 570.7 on NSE today. The benchmark Nifty Bank index advanced more than 1% to 26,767.9 on Monday. Earlier last week only, the stock of RBL Bank hit a 52-week high of Rs 576.

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