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Despite modest growth, Motilal Oswal is positive on these 3 private banks

Despite modest growth, Motilal Oswal is positive on these 3 private banks

Despite modest growth, Motilal Oswal is positive on these 3 private banks
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By Mousumi Paul  Sept 6, 2019 10:12:10 AM IST (Updated)

Loan growth of private banks moderated to 16 percent on year in the first quarter of FY20 amid a slowdown in the economy and consumption-linked sectors, brokerage Motilal Oswal said in a report.

Loan growth of private banks moderated to 16 percent on year in the first quarter of FY20 amid a slowdown in the economy and consumption-linked sectors, brokerage Motilal Oswal said in a report.

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While the retail loans grew, lending to NBFCs declined by 1 percent QoQ due to liquidity issues and the cautious stance of banks towards lending to this segment. Meanwhile, banks have continued to lend to strong parentage/better-rated NBFCs.
Still the brokerage remains positive on corporate banks and expects profitability improvement on the back of higher NII growth and moderation in slippages compared to the trend witnessed during the last few years. It prefers ICICI Bank, Axis Bank and HDFC Bank as it expects their earnings to grow significantly from FY20 onwards.
Financials
With regards to the loans to the automobile sector, Motilal Oswal said, “Auto loans moderated and showed tepid growth of about 5 percent YoY due to the auto sector slowdown and increased caution towards lending to auto dealers. Further, some moderation was also witnessed in unsecured loans, which had grown at a strong pace in recent years.”
Financials Financials
The retail sector (+17 percent YoY) remains the key driver of loan growth as at July 19. Service sector growth moderated from mid-20 level seen till February 2019 due to slowdown in lending to commercial real estate and NBFCs. Also, retail traction for banks was driven by strong growth in credit cards (+27% percent YoY), housing loans (+19 percent YoY) and other personal loans (+24 percent YoY), the report added.
 
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