HDFC Bank, SBI, IndusInd, Federal, Axis, ICICI, KMB, BOB, BOI, BOM: Share price targets

Systematix Institutional Equities in its banking Q4 preview note gave 'Buy' rating to 10 of its coverage stocks, while suggesting 'Hold' rating on two others. The domestic brokerage said banks reported stable asset quality for the quarter but net interest margins (NIMs) of a few lenders saw sharp cuts. The buy list included State Bank of India, ICICI Bank Ltd, Kotak Mahindra Bank Ltd (KMB), Bank of Baroda and Union Bank. Others included Axis Bank Ltd, HDFC Bank Ltd, Bank of India, Bank of Maharashtra (BOM) and Federal Bank. IndusInd Bank and Indian Bank are two 'Hold' calls. For now, its top three banking picks are SBI, ICICI Bank and KMB. 

The March quarter had some benefit from the downward repricing of deposits book but for few banks, but Systematix  said it was to a limited extent leading to a sequential fall in NIMs for banks such as STate Bank of India (SBI), Union Bank, Indian Bank and Axis Bank Ltd. The guidance on NIM was a mixed-bag, with its coverage banks broadly equally divided between an expectation of ‘decrease’, ‘increase’ and ‘rangebound’.

"The slippages in the quarter were broadly in control with most coverage banks reporting sub 80 bps of net slippage ratio (except IndusInd Bank). There is no incipient rise is asset quality yet but the banks expect the true impact of the west Asia war to be visible in Q2FY27 or in H2FY27," Systematix said.    

Due to broadly stable slippages sequentially, the credit cost was broadly stable except for few banks namely Federal Bank, BOB, Union Bank and BOI, as they utilised their one-off higher recoveries from written-off accounts or favorable tax ruling for creating buffer provisions.

Systematix said the final guidelines on the new Expected Credit Loss (ECL) provisioning came on April 27. While the banks are still assessing the full impact, they sounded confident on managing the transition with a guidance range of 0.7 per cent to 2.5 per cent impact on capital adequacy. 

"Growth in net advances for our coverage universe seen in 3Q has sustained in 4Q with aggregate sequential growth of 5.2 per cent. Deposit growth (aggregate for coverage banks) outpaced the advances growth sequentially, growing by 6.1 per cent QoQ due to 4Q seasonality. Though we assume an upside risk to asset quality in the coming quarters the recent government schemes will act as a buffer," Systematix said.

As far as target prices are concerned, Systematix suggested a target of Rs 1,670 for ICICI Bank, Rs 1,250 for SBI and Rs 480 for KMB. BOB, Union Bank and Axis Bank received targets of Rs 335, Rs 205 and Rs 1,560, respectively. Here's the full list:-