< The 2016 All-Asia Research Team
Anil Agarwal & team
Morgan Stanley
First-Place Appearances: 6
Total Appearances: 17
Team Debut: 1997
After two years on top, Anil Agarwal and his ten-person Morgan Stanley crew slip to second place. The analysts’ regular dialogs with investors via conferences are especially valuable, one portfolio manager reports, adding that “the team is comprehensive in its coverage, with dedicated persons to cover each part of Asia.” The squad monitors more than 110 banks in the region and expects the sector to perform weakly in 2016. Year to date as of late April, it had fallen 4.8 percent, while Asia ex-Japan shares overall rose less than 1 percent. “Banks are struggling to show revenue growth, as loan growth has slowed across geographies. This is causing a pickup in competition for lending, driving down net interest margin securities,” explains Agarwal, 41. “On asset quality too, while we don’t expect bad loans to surge, we expect credit costs to keep trending up at a slow pace. Weak revenues and higher loan losses will keep profitability and hence stock performance constrained.” They recommend that clients prefer HDFC Bank over other names in the space. India’s largest lender, by market cap, has been gaining market share in key segments of its domestic industry as competition continues to weaken, the researchers advise. This positioning should help HDFC deliver greater than 20 percent revenue and profit growth, “which is tough to get from a large-cap financial in Asia,” he points out. “The bank has also made strong strides on digital offerings, which will help improve the efficiency ratio in the medium term.” Their price objective for the stock is 1,350 rupees, implying a 23.6 percent potential upside to its value in late April.