Opportunity in banking industary

Credit growth at 9 year high. Last year profit at all time high. This industry and the financial sector are at the begging of a multi year bull run. I feel the next 5 yrs are going to be the golden years for the Financial sector and especially banking industry.

I believe there are 3 banks which have the ability to outperform the banking industry in the next 4 to 5yrs. I would like to share the name of three of them and give a basic reasoning as to in which I have invested or not.

1. IDFC BANK – This bank has the brightest chances of outperforming but my reason to not invest here is it is a completely growth stock and epically in banking where the probability of a bad quarter is extremely high if investor see the next 2 quarters not as per expectation the volatility on these type of stocks can take the prices close to 50% down. Since I invest 40% to 70% in stock which I am confident I cannot invest in stocks which such high volatility.

2. FEDERAL BANK – This bank is a brilliant buy at 1PB and I have a view that the downside here is very low. The only problem they have is geographical risk. If you see they don’t have too many current accounts with them because kerela is an agriculture based economy and does not have big industries. For getting CA you need to have your branches PAN india. But technologically they are extremely good especially with their tie ups with neo bank. I have done a detailed analysis in this counter which I will post soon. You have to understand the middle east a little bit when analyzing this company because inward remittance is a big source of their money which comes form Keralite working in middle east. Just for add on info if you see the reason they go and work outside is because there is insufficient jobs in kerala for the skill set they bring.

3. YES BANK – Considering the growth which it can deliver in future the valuations of it currently make no sense to me. I share my view on this counter on its respective forum so wont be writing to much here. Currently this bank is close to 70% of my portfolio and I am pretty confident of it reaching a 1 lakh cr mcap by 2025.

There are 2 more stocks which I believe have the potential and I am analyzing them currently. INDUSIND BANK and BANDHAN BANK.

Overall I feel there are going to be heavy tail wind and I hope to make a lot of money out of them. I also hold 2% position on IDFC BANK of my entire portfolio and I am extremely interested to understand federal bank a bit deeper and take position here in future.