Weak consumer demand and a slowing economy have already taken a toll on auto, consumer goods and infrastructure but one sector that is facing the slow heat is the banking space.

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Private banks such as IndusInd Bank, Kotak Mahindra Bank and HDFC Bank in their Q3FY20 earnings this time showed a surge in bad loans on the back of the overall gloomy economic scenario.

The only bank to report a slightly well-shaped earnings report this quarter is ICICI Bank. However, despite a 158 percent YoY increase in net profit, ICICI Bank also saw some swell building up in the gross non-performing assets (NPAs).

The only bank in the third quarter that reported a minor decline in the NPAs is Axis Bank.

Post earnings, HDFC Securities said, “ICICI Bank reported an inline quarter across all parameters. PAT jumped on account of lower provisions. While the pace of asset quality improvement may slow in the near term, as with some of its peers, the broader trajectory remains unchanged.”

The brokerage maintained ‘buy’ on ICICI Bank with a target price set at Rs 587 apiece.

In the case of HDFC Bank, JP Morgan believes that a higher slippage rate during the quarter along with CEO transition issues could be an overhang on the share price in the near term despite strong headline growth offered.

Sharing a similar view as JP Morgan, ICICI Direct Research said it was a mixed performance by Kotak Mahindra Bank in an otherwise weak quarter. The bank has been one of the most consistent performers over the years, driven by best-in-class return ratios and margin profile. A cautious approach within corporate, SME and unsecured retail is seen impacting growth, said the brokerage report.

Citing reasons of economic headwinds, ICICI Direct Research maintained ‘hold’ on Kotak Mahindra with an unchanged target price of Rs 1,700.

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