India's state-owned lenders' discount to private banks close to historic lows, Macquarie says

City Union Bank

24/06/2024 10:01

** Public sector banks' discount to private banks close
to historic lows, Macquarie says, a positive for the latter
  
    ** Adds, State Bank of India's  SBI.NS  valuations compared
to private peers Axis Bank  AXBK.NS  and HDFC Bank  HDBK.NS 
show discount is now 1-standard deviation below historic
averages
    ** "There is a clear preference for private sector banks
among financials," says Macquarie, citing steady earnings
outlook as they will be less affected by Expected Credit Losses
(ECL) regulations and carry contingent buffers
    ** Bottoming out of credit costs, likely impact due to
regulations point towards lower return on assets, profitability
for India' state-owned lenders, says Macquarie
    ** Last week, brokerage upgraded Kotak Mahindra Bank
 KTKM.NS  to "outperform" from "neutral", while also upgrading
City Union Bank  CTBK.NS  and Bandhan Bank BANH.NS  
    ** India's Nifty private bank index  .NIFPVTBNK  up 3.63% 
so far in 2024, underperforming 8.3% rise in Nifty 50  .NSEI 
index

 (Reporting by Bharath Rajeswaran in Bengaluru)
 ((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))