February 3, 2011 / 8:39 AM / 7 years ago

MARKET EYE-RBS says "cautiously optimistic" on banks

The Royal Bank of Scotland in a report on Thursday said it is “cautiously optimistic” on the banking sector following its recent stock price correction. A 50-75-basis point hike in deposit and lending rates from here-on will likely dampen demand for loans and push up deposit growth, translating into a more balanced scenario, it said. “Given the stock-price correction and our expectation that the gap between deposit growth and loan growth will narrow, we turn cautiously optimistic.” It prefers public sector banks over private sector. Their top picks among public sector banks are State Bank of India (SBI.BO), Punjab National Bank (PNBK.BO) and Bank of Baroda (BOB.BO). Among private-sector banks, RBS has retained “buy” rating on HDFC Bank (HDBK.BO), “hold” on ICICI Bank (ICBK.BO) and “sell” on Axis Bank (AXBK.BO). Reuters Messaging:jigar.pathak.thomsonreuters.com@reuters.net

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