Table of Contents
Low cost wholesale funding – Genesis and likely direction.......... 3
Consequence of excess liquidity with unprecedented features ...............................................3
Phenomenon exaggerated by stubbornly high cost of retail funds...........................................6
Economic recovery and cheap wholesale costs do not go hand in hand..................................7
Performance of largely bulk-funded financials ............................... 8
Matching low funding cost with suitable deployment has been a challenge............................8
Margin expansion noticed, but modest ....................................................................................8
Diverse trends in tenor of borrowings, indicating time for trend change..................................9
Financials’ funding strategy as per recent discussions................ 12
This has only served to highlight the primacy of retail funding ...............................................12
Incorrect to presume large margin expansion on re-pricing of wholesale ..............................12
Regulator facilitating ‘retailisation’ still critical for the sector ..................................................13
Similar trends visible regionally..................................................... 14
Valuations, target prices and ratings............................................. 15
Wholesale-funded group has outperformed strongly, now may take a breather....................15
Earnings estimates and target price changes .........................................................................15
On a relative basis we prefer financials with better retail funding ..........................................16
Companies Section.......................................................................... 17
Axis Bank.......................................................................................... 18
ICICI Bank......................................................................................... 26
IDFC .................................................................................................. 36
HDFC................................................................................................. 48
Kotak Mahindra ............................................................................... 58
YES Bank .......................................................................................... 68