Emkay Global Sees Next Banking Rally in Small- and Mid-Cap Private Banks
Key Takeaways
- •Seshadri Sen of Emkay Global said small- and mid-cap private banks in India stand to benefit as credit growth picks up.
- •He identified accelerating system-wide credit growth and capital raises as the two key supportive factors for these lenders.
- •Fresh capital infusions expand smaller banks' lending capacity because regulatory capital norms limit loan-book growth relative to their capital base.
- •Indian credit growth has moderated from the high double-digit rates seen after the pandemic, and smaller banks are typically more geared to any acceleration.
- •The CNBC-TV18 segment also addressed the firm's views on oil, energy stocks, and other market topics.
Seshadri Sen, Head of Research & Strategist at Emkay Global Financial Services, has indicated that small- and mid-cap private sector banks in India are positioned to benefit as credit growth picks up, according to remarks shared with CNBC-TV18.
Sen pointed to two supportive factors for these lenders: an acceleration in credit growth across the banking system, and capital raises that are strengthening the smaller private banks' growth plans. Capital adequacy is central to how quickly a bank can expand its loan book, since regulatory capital norms constrain lending relative to a bank's capital base — meaning fresh infusions effectively expand a smaller lender's capacity to grow credit. Strong earnings were also referenced in the discussion, though the full details were cut off in the published excerpt of the video segment.
The comments come amid ongoing attention on India's banking sector, where private banks of different sizes have experienced diverging performance cycles in recent years. Smaller and mid-sized private lenders have at various points trailed their larger peers on valuation metrics, making their outlook a recurring subject of market discussion. Historically, credit growth in the Indian banking system has tended to moderate from the high double-digit rates recorded in the years following the pandemic, so an acceleration would mark a shift in that cycle — a shift smaller banks are often more geared to, given the relatively lower base of their loan books.
Emkay Global Financial Services is a Mumbai-based brokerage and research firm, and Sen leads its research and strategy function. The interview, published by CNBC-TV18 on its Markets channel, also touched on the firm's broader market views, including areas such as oil and energy-related stocks, based on the topics tagged to the segment (banking stocks, energy stocks, oil marketing companies, PSU bank stocks, private banks, Indian equities, and US bond yields).
The full discussion is available in video form on CNBC-TV18's website: Is the next banking rally hiding in smaller private banks? Emkay Global answers.
