Macquarie cuts banks, cites low growth, weak rupee
Mumbai: Macquarie downgrades banks to "underweight" from "neutral", citing an extended period of low growth till the general elections in April/May 2014 and rupee weakness reducing leeway for monetary easing.
The brokerage cuts State Bank of India to "neutral" from "outperform", Punjab National Bank to "underperform" from "neutral". It upgrades Kotak Mahindra Bank Ltd to "outperform" from "neutral".
Macquarie says investors should specifically avoid state-run banks and recommends buying HDFC Bank, ICICI Bank and Kotak, citing a high degree of earnings visibility and stable funding.
The brokerage adds that although some of the recent measures by RBI could be reversed, there will not be a situation where banks' funding costs come down.
It factors a net interest margin decline of 25 basis points on average for Indian banks now.
Based on its analysis, Macquarie also points out that most large assets restructured earlier are not performing well and the "big names" in the business, amounting to close to 2 trillion Indian rupees of debt, are yet to be restructured and will come up over the course of the next few years.