EUR 120.00 For Business Accounts Only

MOSL: FINANCIALS-Moderation in bond yields to bring some respite for PSBs-SBIN, PNB & CBK best placed to benefit from treasury gains

FINANCIALS: Moderation in bond yields to bring some respite for PSBs; SBIN, PNB & CBK best placed to benefit from treasury gains

 

• The yields on G-Sec bonds of different maturities have declined ~20-50bp during FY20 YTD. This has happened on the back of 110bp/70bp decline in the 5-year/10-year G-Secs yields during 2HFY19 v/s 1HFY19.
• With ongoing moderation in the rate environment, the current yields on the 5-year/10-year G-Secs are only ~20-35bp away from the lows seen during the demonetization period of Dec-’16.
• Public sector banks (PSBs) under our coverage reported muted treasury gains of INR34b in FY19 (with just INR3.8b in 1HFY19) v/s INR224b during FY18. With sharp moderation in bond yields we expect treasury performance of banks to revive, especially of PSBs holding higher government securities.
• Our sensitivity analysis suggests that SBIN will benefit the most, followed by PNB and CBK. Among private banks, we expect ICICIBC to report strong treasury performance.