ANALYST: Mona Khetan, Senior Analyst-Banking, Reliance Securities
RATING: Buy with TP of Rs 470
THE MARKET has not factored in several positives for ICICI Bank in the recent time owing to concerns on corporate governance. The private lender has strengthened its deposit franchise over time, resulting in competitive cost of funds, lowering need to take risks on the asset side. The bank has also improved capital efficiencies over time by lending to better rated entities and capitalizing on their large presence to boost the retail loan book. Further, ICICI Bank is currently trading at a discount compared to other private peers and could give attractive returns in the medium term.
ANALYST: Rohan Mandora, Analyst, Equirus Securities
RATING: Long with TP of Rs 340
THE STOCK which had taken a beating in 2018 is well poised to deliver good returns over next one year. Two of the biggest investor concerns in the stock have now been addressed. The first one being appointment of an external candidate Ravneet Gill as the next MD & CEO while the second is clean chit from the RBI in terms of divergence. We believe the focus will now shift to timing of raising capital and strategy of new management. While loan growth will likely moderate during the transition phase, we expect the net profit of the lender to grow 25 per cent in FY20 while the return on assets is expected to grow at a healthy rate of1.5 per cent-1.6 per cent. Despite the recent run-up YES bank currently trades at inexpensive 1.8 times FY20 book value compared to historical 10-year average of 2.5 times.
State Bank of India
ANALYST: Siddharth Khemka, Head Retail Research, Motilal Oswal
RATING: Buy with TP of Rs 340
THE CURRENT market environment seems conducive for corporate lenders and larger public sector banks. SBI is an exciting play in this category with healthy loan book growth and moderation in fresh slippages in the asset quality front. The Supreme Court ruling on RBI norm is definitely negative for banking sector however it may not materially impact SBI’s asset quality in a near term as bulk of the stress assets have already been recognized. The state-owned lender is also placed very well in terms of capital adequacy, which is currently an issue for several smaller PSU banks. The fiasco in non-banking financial companies (NBFCs) has also provided an opportunity for banks to lend aggressively in the retail space. Lenders such as SBI with large branch connectivity will benefit from the opportunity. During December quarter, the lender saw 18 per cent year-on-year growth in retail loan book while the corporate loan grew by 21 per cent year-on-year.
ANALYST: Pritesh Bumb, banking analyst, Prabhudas Lilladher
RATING: Buy with TP of Rs 2,320
WE CONTINUE to be positive on HDFC Bank as India is still an under-penetrated market in the retail segment. The asset quality of the lender looks good with lower non-performing assets (NPA). Any rate cuts by the Reserve Bank of India (RBI) will also help HDFC Bank especially in the consumer loans category. We expect HDFC Bank to grow at 20-25 per cent rate in the next one year even as the overall Indian banking industry grows at 13-14 per cent. The stock could give 15-20 per cent returns in the medium term. The target price is expected to revised post the fourth quarter results.