2 Banking Stocks To Buy Ahead Of RBI’s Monetary Policy

Buy IndusInd Bank for an upside target of 40%

Broking firm, Emkay Global in its recent research report has recommended the stock of IndusInd bank. The brokerage has noted that as per management, the bulk of the retail and SME stress formation from the second Covid wave is behind, and normalization should start from the second half. The bank carries a healthy Covid contingent provision of Rs 20 billion (inclusive Rs 12 billion for restructuring)/1% of loans. Its specific provision stands at Rs 1.5 billion toward the risky telecom exposure.

 

IndusInd Bank: Buy the stock for a target of Rs 1,375

According to the Emkay Global report, deposit growth (26% yoy) far outpaced credit growth (6% yoy), hurting margins in Q1. However, steady retailization of assets (55% vs. 52%)/liabilities (50% vs. 37%) and credit growth acceleration with a better grip on asset quality should drive Net interest Margins higher.

"This, coupled with moderating LLP, should increase returns on assets/returns on equity to 1.7-1.9%/15-16% over FY23-24E. We believe a resurgent IndusInd Bank with a better liability profile, higher retail orientation, and risk-guards in place should deliver sustainably higher return ratios, providing a good turnaround story to play on. Retain Buy with a revised target price on the stock of Rs1,375," the brokerage has said. Shares of IndusInd Bank last closed at Rs 1,032 on the NSE.

ICICI Bank stock: Buy says Prabhudas Lilladher

Brokerage firm, Prabhudas Lilladher has a buy on the stock of ICICI Bank with a price target of Rs 815, as against the current market price of Rs 690.

The brokerage says that the asset quality of the bank was managed well in quite tough environment. Bank saw slippages of Rs 72.3 billion (4% of loans) with mainly from retail & agriculture and gold loans. Although, bank also saw strong recoveries of Rs 22.6 billion mainly from the loans turned bad in Q4FY21 and guided for further recoveries in the gold loan & retail segment.

According to the brokerage the bank also saw runaway business growth as loans grew by 17% YoY & 1 % QoQ driven by retail growing at 20% YoY and business banking by 53%.

ICICI Bank: Key financials

"Strong franchise strength is reflecting in strong growth path both in liabilities & assets with much better managed risk which keep Return on Equities to move towards 15-16% in FY23. Maintain conviction buy with revised target price of Rs 815 (from Rs 750) based on 2.4 times Sep-23 ABV (rolled from March 23) and subsidiaries value of Rs 181 (from Rs 164)," the brokerage has said.

	FY 21-22	FY 2022-23
Net Interest Income (billions)	Rs 453	Rs 524
Net profits (billions)	Rs 212	Rs 257
EPS	30.7	37.0
Net interest margins	3.7%	3.8%

Disclaimer

The above stocks are based on the report of Emkay Global and prabhudas Lilladher. Investing in stocks is risky and investors should do their own research. The author, the brokerage firms or Greynium Information Technologies are not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise due caution as are at record peaks. Please consult a professional advisor.