The banking sector is under pressure after the first-quarter earnings of HDFC Bank missed the street expectation. There were some asset quality issues and the management too sounded caution.

Siji Philip, Senior Research Analyst at Axis Securities, shared her analysis on HDFC Bank’s Q1 earnings performance and the earnings outlook for the sector in an interview with CNBC-TV18.

According to her, the bank’s earnings on a quarter-on-quarter basis were bit moderate, especially on the operating side when there was pressure on NIMs. “So, the pressure is visible but we should take cognisance that their loan book is moving towards corporate loans book and there is more personal lending happening because of which the pressure on NIMs is visible.”

She said some impact because of the slowdown in the credit card business, other businesses like CV, which got impacted, plus an overall cautious outlook has muted the performance for HDFC Bank.

For the sector per se, the performance will be more bank specific because the lending and portfolio mix is different for each bank. Therefore, a mid-size banks would face more pressure on asset quality front compared to larger banks. So earnings could be a mixed bag.

Given the current trend, banks such as Kotak Mahindra Bank could face pressure because of their SME exposure, while ICICI Bank would be relatively better off since they have more retail based book among tier I banks and from midcap space City Union Bank could be under pressure because of higher exposure to the SME segment.

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(Edited by : Bivekananda Biswas)