HDFC, ICICI, SBI, Kotak Bank among 23 BFSI stocks to ‘Buy’ - Target prices

As the fourth-quarter earnings season approaches, the banking, financial services and insurance (BFSI) sector is gearing up to report its performance. According to a latest sector note by Axis Securities, credit growth has revived, logging around 15 per cent year-on-year growth for its coverage universe. 

This surge is primarily being driven by small finance banks (SFBs) alongside public sector banks and mid-sized private lenders, the brokerage noted, adding “though geopolitical risks may weigh on momentum.”

“Deposit growth continues to lag, keeping funding costs elevated and competition for CASA intense. NIM trends are expected to remain divergent, with mid-sized banks and SFBs seeing NIM uptick, while large private banks and PSBs defend margins amid yield compression and sticky CoD,” it said.

The brokerage pointed out that the asset outlook appears favourable with the stress from unsecured loans in the rearview mirror, while the secured and corporate segments are holding their ground well. 

“The pace of fresh stress accretion in the unsecured portfolios is expected to come off, and slippages during Q4 are expected to be sequentially lower,” Axis added.

“NBFCs are expected to deliver strong AUM growth (led by diversified, vehicle, and gold financiers) and earnings growth (driven by lower credit costs),” the brokerage said.

Target prices and ratings

Axis Securities remains selective but optimistic, issuing 'Buy' calls across the sector. In the banking space, the brokerage has set a target price of Rs 1,020 for HDFC Bank Ltd, while ICICI Bank Ltd commands a target of Rs 1,700. 

Kotak Mahindra Bank Ltd has a target price of Rs 515, and State Bank of India (SBI) is pegged at Rs 1,350. Other banking picks include Bank of Baroda with a target of Rs 360, Bandhan Bank at Rs 160, City Union Bank at Rs 360, Federal Bank Ltd at Rs 320, DCB Bank at Rs 225, and IDFC First Bank at Rs 87.

For a complete look at all the stocks recommended by the brokerage, please refer to the image attached of the report's valuation guide below:

Among the small finance banks, the brokerage is positive on AU Small Finance Bank with a target price of Rs 1,160, as well as on Ujjivan Small Finance Bank, which has been assigned a target of Rs 74. 

The 'Buy' recommendations also extend to select NBFCs, including Bajaj Finance with a target price of Rs 1,150, Cholamandalam Investment and Finance Company at Rs 1,125, and CreditAccess Grameen at Rs 1,200.