There might be few meaningful portfolios without having bank stocks within them. Almost from the past two and half years banks are in news for their asset qualities. So what are the variables you should look at while assessing any bank stocks?

There are broadly six variables to focus on when assessing the outlook for the banks:

  1. Loan book growth
  2. Net interest margins
  3. Non-interest income growth
  4. Cost growth
  5. Asset Quality
  6. Capital requirements

The growth in the earnings of bank are fuelled by growth in its loan book. How loan book is behaving gives signals about demand and supply of debt as well as competitiveness of the banking system in providing that debt. It also gives insight on the availability of lending capacity of bank.

Net interest margin tells us about how efficiently bank is managing its funds. Today bank is not only in lending business. They also deal in various financial products and make money by giving those services to their customers. To survive and keep edge over competitors in this industry, it is important that they grow and build this non-interest income business.

The biggest expenditure for banks is the cost of its source funds. How fast or slow their funding cost tells us a lot about what margins to expect and how profitable they will be. Asset quality is all about NPA’s and there is a lot written and explained about it in the media in the past one year.

If asset quality deteriorates of any business then they have to keep aside money as provisions towards it. Banking business is all about leverage. If banks are provisioning high amount of funds then they need injection of fresh funds as capital to keep running smoothly.

As the first quarter results for 2017 are out, we thought to check few banks on the above variables. So that we can understand their business outlook.


Loan Book Growth NIM Non- interest income growth Cost Growth Asset Quality

Axis bank logo

21% 3.86% 19% -4%

Net NPA – 1.08%


23% 4.60% 14% -4%

Net NPA – 0.32%

jk bank logo

13% 3.60% -14% -11%

Net NPA – 6.19%

yes bank logo

33% 3.46% 65% -10%

Net NPA – 0.29%


12% 3.34% 15% -8%

Net NPA – 3.35%

sbi logo

9% 2.95% 43% -5%

Net NPA – 4.05%

kotak-logo 17% 4.38% 24% -13%

Net NPA – 1.06%


Looking at the above table Kotak Mahindra bank and Yes bank business looks in good condition. But SBI and JK bank still look in the bad condition. Share with us your findings about the bank you are invested on above variables.

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Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise you to take professional advice before going ahead with our views.