According to him, HDFC Bank is still dealing with a less-than-optimal liability structure after the merger, but this is gradually improving. As high-cost liabilities roll off over time, margins should see a steady and benign tailwind. Even if margins soften in the near term across the sector, he believes HDFC Bank’s longer-term re-rating story remains firmly in place.
He also added that the market is likely to focus more on margins and loan growth trends rather than short-term movements in credit costs.
Chakrabarti said ICICI Bank continues to be a preferred name given its strong track record over the last four to five years and the continuity in leadership. He believes this stability should support the bank’s performance over the next 12 months.
That said, he flagged a near-term risk. Slight weakness in retail loan growth and savings account accretion over the last couple of quarters could lead to some pressure on the stock, especially as market expectations from ICICI Bank are very high.In his view, any such weakness could actually create a buying opportunity for long-term investors.
While acknowledging the strong recent performance of PSU banks, Chakrabarti sounded cautious. He maintains a neutral view on State Bank of India, citing concerns around sustainability of returns.
He explained that PSU banks rely heavily on high leverage and unusually low credit costs to deliver mid-teen returns on equity. Such low credit costs, in his view, are unlikely to be sustainable. Even a normalisation to moderate levels could sharply hurt earnings growth and return ratios, limiting further upside despite healthy balance sheets and market share gains.
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