Q2 Banking preview: Mid-sized private banks to outshine peers

Among state-owned banks, SBI and Bank of Baroda are the key picks

The key factors expected to impact earnings for banks in the July-September quarter are -- first, tepid corporate loan growth; second, excess liquidity chasing quality credit (pressure on yields); and third, progress on stressed asset resolutions under Insolvency and Bankruptcy Code (IBC) as well as quantum of new cases referred.

Backed by excess liquidity and continued high current account, savings account (CASA) ratio in the system, cost of funds may remain benign, especially for bulk lenders. We expect trading gains to remain flat/decline marginally versus the first quarter of the FY18.

Key things to watch for in the results would