The RATE RACE begins: Yes Bank Increases Savings rate to 6%

After RBI deregulated interest rates on Saving Account Deposits yesterday (25TH Oct 2011) Yes Bank grabbed the opportunity to ignite a rate war by offering 6% interest in an effort to wean away accounts from established players with very high number of savings account, such as SBI, HDFC Bank.

HDFC Bank and SBI has very high CASA deposits of close to 50% of total deposits and has built vast troves of cheap cash in savings account. 

ICICI Bank Q1 FY 2011-2012 Result and Valuation analysis

ICICI Bank has declared its first quarter result. It has reported a sharp jump of 30% (YoY) in profit. During the period, net profit of the bank increased to Rs 1,332 crore against Rs 1,026 crore in the corresponding quarter of last fiscal. However on QoQ basis the net profit came in lower by 8.3% as the bank did a net profit of Rs. 1452 crores in Q4 of fical year 2011.

Buy ICICI Bank - Recommends Aditya Birla Money

Aditya Birla Money is bullish on ICICI Bank and has recommended buy rating on the stock with a target of Rs 1100 based on technical indicators. The current market price of ICICI bank is Rs.1033.  Download the research report from the following link: http://www.moneycontrol.com/news_html_files/news_attachment/2011/ICICIBank_Aditya_150611.pdf

　

But we at InvestorZclub believe that bank stocks should be avoided at this point of time when the interest rate has yet not peaked and RBI is expected to raise the rates further because of stubbornly high inflation.

One can start looking at quality bank stocks only after there are signs of moderation in Inflation and interest rate without which the banks would continue to under perform.

We at InvestorZclub have been bearish on banks since past few months (http://investorzclub.blogspot.com/2011/05/should-one-invest-in-banking-stocks-now.html) and continue to do so because of high inflation, interest rates and increasing NPAs.

FEDERAL BANK - Strong Buy @ 435, Target 700 in 1 to 1.5 year

Rakesh Jhunjhunwala has picked stake in Federal bank recently. He disclosed this in an interview. The reason seems to be very obvious, its undervaluation relative to the other private sector lenders like ICICI bank, HDFC, AXIS Bank, ING Vysya Bank etc.

On FY-12 basis it is quoting at around 1.2 times book value. Even public sector lenders are available at somewhere in the range of 1.5 to 2.5 times book. Private sector lender are anyway available in the range of 2.5 to 4 times book.

The reason for its undervaluation in past 2 years has been its low retun on Net worth because of its right issue in 2007. But with loan book growing at 25% annually it is expected to report better RONW in coming years and hence should start commanding better valuation.

At expected PBV of 2.0 for the Financial year FY-12, the stock is expected to generate around 60 to 70% return from current levels in 12 to 18 months time frame.