INDIAN BANKING: Loan growth moderates to 23.2%; Deposits growth at 15.9%; CD ratio remains at ~75% - Motilal Oswal

Loan growth moderated to 23.2% YoY vs 23.6% a fortnight earlier. Loans in absolute terms increased by Rs153b during the fortnight vs Rs433b a fortnight ago.

Deposits in absolute terms grew by Rs377b; deposit growth down to 15.9% vs 16.4% a fortnight ago. From March 2011 levels, deposits grew 11.1%.

SLR investments increased by Rs161b during the fortnight. SLR ratio stands at 27.3% vs 27.2% a quarter ago

On back of higher base in 4QFY10 and 1QFY11, we expect loan growth to moderate going ahead. For FY11, we expect loan growth of 20-22%.

Continued monetary tightening and its lagged impact on FY12 growth remain key headwinds for the sector performance. The 3QFY11 earnings performance was encouraging with strong operating performance for banks. As asset quality shows improvement, fall in credit costs will help offset margin pressures. With an over 25% correction in the sector valuations, we believe that stocks offer very good returns from here. Our top picks are ICICI Bank, SBI and Yes Bank.

Source : Equity Bulls

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