Bank Stocks Outlook for the week – 27 to 31.07.2015
(Volatile
next week ahead of earnings)
Bank
stocks are expected to be volatile next week ahead of contract expiry on
Thursday, but stockspecific action will continue with the ongoing Apr-Jun
earnings season.
Next
week, investors will pay close attention to ICICI Bank, Punjab National Bank,
Union Bank of India, Allahabad Bank, YES Bank and Kotak Mahindra Bank as they
are scheduled to declare their Apr-Jun earnings.
The
focus will continue to be on asset quality, which has been under pressure and
is dragging down net profits for banks. We prefer stocks of private sector
banks over public sector peers and asked investors to be selective while
picking up PSU banks in their portfolios.
While
a rethink over the capital allocation policy would be positive for weaker PSUs
(banks), we
believe
weak PSUs will still find it challenging to raise external capital for the 50%
balance and
these
infusions will be highly book-dilutive. We continue to remain selectively
positive on PSU
banks,
but expect the recovery to remain very gradual on asset quality.