HDFC Bank, ICICI Bank, Axis Bank, Kotak Bank: What share price fall signals ahead of Q2 earnings

Shares of HDFC Bank, ICICI Bank, Axis Bank, Kotak Bank, IndusInd Bank have fallen up to 29% this year as market correction eats into shareholders' portfolios. The fall in the stocks comes ahead of the Q2 earnings season. However, pre-quarter releases of Indian banks show healthy loan and deposit growth, reflecting buoyant core and lift from FCNR-B raising.

According to Jefferies, underlying loan growth, excluding FCNR-B-linked lending, remained broadly steady. Banks have also used a portion of FCNR-B deposits to replace relatively expensive funding and strengthen their liquidity coverage ratios (LCR). As a result, adjusted deposit growth appears somewhat softer, but the funding mix has improved in terms of cost and overall quality.

The BSE bankex is down nearly 8% this year, reflecting selling pressure across the sector.

The brokerage shared its outlook on the private sector banks and analysed their business updates for the second quarter.

ICICI Bank: Jefferies has a price target of Rs 1750 with a buy call on the country's second-largest private sector lender. The stock was trading at Rs 1343 on BSE today.

HDFC Bank: Jefferies has a price target of Rs 880 with a buy call on the country's largest private sector lender. The stock price of the bank stood at Rs 706 today. The brokerage said HDFC Bank delivered a stronger growth performance in the September quarter, with loans rising 16% year-on-year, deposits increasing 19% and CASA deposits growing 11%.

Axis Bank: The brokerage has a buy call on the stock with a price target of Rs 1700. The stock price of the bank stood at Rs 1243 today. The lender recorded a 23% year-on-year loan growth in the September quarter, while deposits grew 21% and average CASA increased 14%. The corresponding growth rates in the June quarter were 19%, 18% and 13%. The bank's LDR stood at 95%.

Kotak Mahindra Bank: With a buy call, the brokerage has a price target of Rs 460 on the lender. The stock price of the bank stood at Rs 434 today. Kotak Mahindra Bank reported a sharp acceleration in growth during the September quarter, with loans rising 25% year-on-year, deposits increasing 23% and CASA growing 11%. This compares with growth of 15%, 12% and 10%, respectively, in the June quarter. The LDR stood at 89%. The reported numbers benefited from $5.8 billion of FCNR-B deposits, of which $1.7 billion was channelled into loans.

IndusInd Bank: The brokerage has a buy call on the stock with a price target of Rs 1250. The stock price of the bank stood at Rs 898 today. IndusInd Bank showed a notable improvement in operating trends in the September quarter, with loans growing 11% year-on-year, deposits rising 10% and CASA increasing 10%. In the June quarter, the corresponding growth rates were -2%, 4% and -2%. Retail deposits expanded 16% year-on-year and 10% sequentially, while the LDR stood at 84%.