Federal Bank, Lakshmi Vilas Bank , South Indian Bank, City Union Bank, Karur Vysya Bank are likely to grow faster due to their niche positioning in home markets, report said.
Mumbai : The South-based mid-sized private sector lenders are poised to see accelerated earnings growth going ahead as their asset quality ratios have peaked out and loan growth is likely to revive after remaining muted over the past couple of years, said a report Wednesday. Also, the niche positioning in their respective home markets will help banks like Federal Bank, Lakshmi Vilas Bank (LVB), South Indian Bank, City Union Bank and Karur Vysya Bank to grow faster, said the report by ICICI Securities.
“We prefer banks with superior earnings growth, sustainable NIMs, stable asset quality, granular loan mix and adequate capital. We expect these five banks to witness a loan CAGR of 11-22 per cent and earnings CAGR of 12-25 per cent over the next two years,” it said.
The brokerage says these banks’ expertise in small- ticket loans to the self-employed segment and good relationship-based banking model will ensure higher-than- industry growth. And therefore maintains a buy/hold on all these four lenders with Federal City Union getting a buy call and the other two a hold call.
“Asset quality improvement for these banks will be aided with strategic shift to retail/SME lending, lack of participation in large consortium-based lending and relatively small stressed-asset portfolios (5/25, SDR, S4A, standard restructured book etc) will come in handy.”