Sector Update: Banking

Sector Update: Banking
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First Published: Thu, May 14 2009. 09 45 AM IST

Updated: Thu, May 14 2009. 09 45 AM IST
Over the past one year, the landscape within the banking system has undergone a material change with public sector banks (PSBs) winning significant market share from private banks.
Not much impacted by the collapse of international financial markets and deterioration in domestic credit environment, PSBs have been doing great business.
The long-term payoff from this seemingly aggressive strategy hinges on how quickly the domestic economy recovers, but in the short-term, it has not sprung-up any noticeable negatives.
The key drivers behind PSBs strong growth are unparalleled branch network, dominant presence in rural and semi-urban India, marginal exposure to retail advances, lower cost of funds and strong brand equity.
We believe that PSBs would continue to lead system credit growth in FY10 and gain market share further.
As valuations are not cheap after the recent sharp run-up, we adopt a NEUTRAL stance on the sector and prefer PSBs.
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First Published: Thu, May 14 2009. 09 45 AM IST
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