What lies ahead for banking, realty sectors in 2019? Here's what CEOs say

After experiencing extreme pressures from stressed loans and provisioning for them for many quarters, banks can look for better days in 2019, says Union Bank of India CEO

Rajnish Kumar, Chairman, State Bank of India 

Many opportunities in 2019

There will be many opportunities for growth in 2019; the biggest challenge was on the asset quality front and banks are coming out of it. Bad loans will decline and the benefits from resolution of stressed assets will accrue. The government has also provided the required capital. Also, the moderation in credit growth of finance companies will provide business opportunities for banks. There will be some rebalancing in market.

Bank credit is expanding at 15 per cent and will grow in the current financial year (FY19). Besides the retail segment, public sector units, which are major spender on the capex side, will be another driver of credit. The private sector investment is also expected to pick up. Those in business for a long time will continue to invest wherever they feel there are opportunities. Domestic investments will continue irrespective of elections in-line with demand and capacity utilisation. The elections may impact foreign investors who may like to wait and watch. 
 

Rajkiran Rai, MD and CEO, Union Bank of India

Uptick in credit growth

After experiencing extreme pressures from stressed loans and provisioning for them for many quarters, banks can look for better days in 2019. The uptick in credit growth will be most the beneficial facet of changing business environment for banks. The gross non-performing assets (NPA) and net-NPAs are expected to reduce further on gains from recoveries through resolution of big stressed accounts and higher provisioning cover.

The easing of bond yields will bring relief to treasuries, contributing to profits. The sharp rise in bond yields meant a rise in marked-to-market provisions and a big drag to the bottom-line. The government’s enhanced capital outlay and infusion in state-run banks will aid to meet regulatory norms and give stability to their financial profile. The valuations will improve, helping banks to raise equity capital — through rights issues and Qualified Institutional Placement from the market — after June. This should help grow the loan book at higher rates.

The credit demand and as consequence disbursals have improved. Till now demand was coming from few sectors. Now in 2019, it will be broad-based. And the banking sector will see a pace of loan growth in excess of 15 per cent. While focusing on exploiting growth opportunities, banks will have to be watchful of sectors like real estate that could be a spoiler.
 

Keki Mistry, Vice-chairman and CEO, HDFC

Good days for real estate

Gazing into a crystal ball for predicting the future is always an onerous task. Many variables and assumptions have to be considered and that too, may, falter as the global headwinds change. Keeping that in mind, the following are the challenges for 2019: The pace of interest rate hikes by the US Fed could determine (a) investment flows into emerging counties and (b) the growth rate of developed as well as developing countries. Trade tensions (US and China) have strong implications which will hurt the manufacturing sector, lead to higher unemployment and eventually hurt global growth. In India, volatility in oil prices will continue to test our economy as we import 80 per cent of our oil requirements. Production cuts by major oil producers will be a challenge as these factors are not in our control. 

As regards trends and opportunities, I am most optimistic about the following factors: 

The thrust on housing by the government, the demand for housing finance and the visible benefits of reforms (eg RERA) would be positive for the real estate sector, particularly affordable housing. Historic trends have shown that the general elections spur rural economies and helps local entrepreneurs. The upcoming polls are expected to help rural demand. I expect the capex cycle to significantly pickup with greater investments in infrastructure projects.