Time to book profit in Banks - BNP Paribas

[chetan]

This is not for Long Term Investors. This is for Traders / Short Term Investors.

BNP Paribas in a Note said,
We think it’s time to book profit; valuations look rich – counter-consensus call. We downgrade Axis Bank, SBI, BOI and PNB to HOLD, from Buy. Axis Bank has been our top pick in the sector since 9 Feb 2009, and we now downgrade the stock as it has achieved our TP and looks fully valued (Axis Bank has outperformed the Sensex by 94% and the Bankex by 61% in the past one year). We also downgrade PNB as our price target has been achieved. We expect speed bumps for SBI over the next 2-3 quarters, as we foresee credit deterioration from its restructured loan book, need for provision coverage ramp-up and potential dilution from a rights issue. For BOI, we are concerned about fresh slippages from restructured loans. We recommend that investors look for better entry points for fresh positions into these names.
 
We find relatively more margin of safety in BOB, UNBK, HDFCB and IIB. We raise our target prices for BOB to INR775 (from INR600), UNBK to INR350 (from INR325), HDFCB to INR2,150 (from INR1,900) and IIB to INR200 (from INR185). At our revised TPs, BOB and UNBK would trade at 1.83x and 1.77x FY11E ABV for ROEs of 18.8% and 19.6% respectively.

[chetan]

Here is what Citigroup had to say,

Indian banks' 4Q10 earnings growth is expected to accelerate to a healthy 26% yoy. While there is help from a low base
in 4Q09, the quarter should also be healthy operationally as well. Pre-provisioning profits (ex trading gains), seen up a strong 34%, suggest strong underlying performance led by high NIMs, rising fee incomes and continued cost control.

Earnings momentum should be led by: a) Stable NIM’s qoq (up yoy on a low base); b) Moderate cost increases (+7% yoy); and c) Falling loss charges (-19% yoy); mix of a slightly elevated base effect, limited restructuring provisions and limit management intent to provision aggressively.

Private banks have started to outpace government banks on earnings and we expect the gap to widen in 4Q10 (+35% Pvt vs +21% Govt) . While PSU banks do offer higher balance sheet growth (3Q10 loan growth of 19% for PSUs vs 4% for Pvt), they also carry higher interest risks on their longer duration bond portfolios and on margins (better liquidity management for private banks). Prefer private banks over PSU’s