Investment bank Jefferies says domestic banks going nowhere

International investment bank Jefferies has found a long list of woes for the domestic banks, and said that their fundamentals are not likely to change much in FY14 in the segment.

“The fundamentals for the banking sector are unlikely to change much in FY14 given the “tepid” loan and deposit growth, “range-bound” net interest margins, and “weak” asset quality,” Jefferies today said in its report ‘Initiating on India Banks: Going Nowhere’, dated April 5.

Jefferies believes banks with strong branch expansion like HDFC Bank, ICICI, and Axis could face smaller problems.

“Over the next 12 months, we believe the fundamentals of the domestic banking sector are unlikely to change much, with tepid loan and deposit growth, range-bound NIMs and weak asset quality,” it says.

“Tight liquidity and weak deposit growth will be the banking sector’s key challenges over FY14, much more than weaker loan growth, with the latter perhaps baked in the numbers. The strained balance sheet funding is reflected in higher loan-deposit ratios and could even create an ALM problems if growth are to be pushed,” it warned.


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