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1、21July2017IndianITServicesEQUITIESITSERVICESTakeawaysfromUS2QbankingresultsseasonforIndianITIndiaUSbankscontinuetoreportbetterfinancialresults(in2Q17)YogeshAggarwal*HeadofResearch,IndiaSustainabilityofrecoveryandhowquicklyitwilltranslateintoHSBCSecuritiesand
2、CapitalMarkets(India)PrivateLimitedyogeshaggarwal@hsbc.co.inhigherITspendstillwarrantspatience;neartermtheremaybe+912222681246somelossofsharetocaptivesandsub-contractorsVikasAhuja*Analyst,ITservicesHSBCSecuritiesandCapitalMarkets(India)PrivateLimitedWehaveaBuyrat
3、ingonInfosysandHCLTechnologiesvikasahuja@hsbc.co.in+912261640690Thebankingsector’srecoveryisthesinglemostcriticaldriverforITstocksinFY18-VivekGedda*Analyst,ITservices&Autos19,inourview.TCS(TCSIN,INR2,380,Hold)andInfosys(INFOIN,INR969,Buy)HSBCSecuritiesandCapitalMa
4、rkets(India)PrivateLimitedbothhaveseenweaknessinthebankingverticalinrecentquartersbutdoexpectvivekgedda@hsbc.co.in+912261640693somepick-upinspendasbankscontinuetodowell.Inthatcontext,2Q17resultsfromthetopbanksintheUSareencouraging.AsseeninChart1,inlinewith2H16*Emp
5、loyedbyanon-USaffiliateofHSBCSecurities(USA)Inc,andisand1Q17,topUSbanksreportedimprovementsinrevenuegrowth.Aftera7%notregistered/qualifiedpursuanttoFINRAregulationsdeclineinrevenuesin1H16,banksreported3%growthin2H16,9%growthin1Q17,and5%growthin2Q17.Asustainedrecov
6、eryinrevenuegrowthforbanksisusuallygoodforthetechspendingoutlook.Inthepast,wehaveseenahighcorrelationoftechspendingwithbanks’revenues(techintensity–thetechspend-to-revenueratio–hasbeenflatinthelastfewyearsforbanks)–refertoChart2.Acontinuedimprovementinbanks’revenu
7、egrowthcouldtriggerhighertechspendandgrowthforIndianITcompanies.ThisiskeyassumptionbehindourInfosysupgradeon8June2017(IndianITServices:Calibratedoptimism).Focusondigitalremainsstrongbutoverallspendstillazero-sumgame:Asinthepastfewquarters,digitalremainsthefocusfor
8、banks.Mobilebankingcustomersareup~14%y-o-yforleadingbankslikeJPMorganChaseandBankofAmericain2Q17.Thechartsandtablesonpage3illustratethedigitalinitiative