Synopsis: Morgan Stanley has picked PNB Housing Finance along with ICICI Bank as its two best investments, forecasting that they will go up by 28% and 28.4% respectively. According to the brokerage, PNB Housing is expected to have robust retail loan growth, whereas ICICI Bank will have a gradual loan uptick supported by declining rates and good asset quality.
In this article, we will dive more into the details of understanding the rationale behind Morgan Stanley’s bullishness in these two companies. So, let’s dive into it and understand the reasons behind this uptick.
The shares of two companies are in focus as the leading global brokerage house, Morgan Stanley, expects the stock to rise significantly. In this article, we will dive more into the details.
With a market capitalization of Rs 22,644 crore, the shares of PNB Housing Finance Ltd are currently trading at Rs 869 per share, representing a decline of 24 percent from its 52-week high of Rs 1,141.85 per share. Over the past five years, the stock has delivered a robust return of 219 percent, outperforming the NIFTY 50’s return of 127 percent.
Morgan Stanley has maintained its overweight rating on the stock and has assigned a target price of Rs 1,100 per share, signalling an upside of 28 percent from its previous day’s closing price of Rs 859.05 per share.
The brokerage cited that the management of the company has kept its expectations for fiscal year 2026, demanding 18 percent retail loan growth as the main growth will be contributed by the affordable and emerging segments, while the prime segment is expected to grow in single digits. It also indicated that the net interest margin for FY26 is anticipated to be between 3.6 and 3.7 percent, compared with 3.7 percent in FY25.
Morgan Stanley notes that the cost of borrowing should relax in the second quarter with a 10 bps reduction in PLR from July 1, 2025. Nevertheless, the stage 3 assets of the affordable segment may rise to 85–90 bps by March 2026. It also added that the CEO selection process is still ongoing, and it is anticipated to be completed by October 2025.
With a market capitalization of Rs 9,98,517 crore, the shares of ICICI Bank Ltd are currently trading at Rs 1,398 per share, representing a decline of just 6.4 percent from its 52-week high of Rs 1,494.10 per share. Over the past five years, the stock has delivered a robust return of 301 percent, outperforming the NIFTY 50’s return of 127 percent.
Morgan Stanley has maintained its overweight rating on the stock and has assigned a target price of Rs 1,800 per share, signalling an upside of 28 percent from its previous day’s closing price of Rs 1,401.50 per share.
The brokerage anticipates that the loan increase will steadily recover with the backing of rate reductions, deregulation, and financial incentives. Still, it mentioned that profitability from interest may decline in the second quarter when the rate cut effects reach the lending side, while the deposit side will allow for some relief.
Regarding the situation of good quality of bank assets, Morgan Stanley noted the positive dynamics of loans secured with collateral, as the occurrence of delinquency in business lending and SME segments remains at a very low level, which reinforces the credit profile of the bank.
Written by Satyajeet Mukherjee
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