Banking stocks are already on an uptrend. However, they gained momentum after the RBI hiked the repo rate by 35 basis points on Wednesday. Both private banks, as well as PSUs, were big winners. The Nifty Bank gained an impressive 19.80% on a year-to-date basis (YTD), while the nifty PSU Bank index gained a massive 69.87% YTD.
In the meanwhile, Jefferies has released a list of 19 stock ideas for the month of December and it sees an upside of up to % in these large-cap banks:
State Bank of India Ltd (SBI)
The State Bank of India is an Indian large-cap multinational bank headquartered in Mumbai. It is one of the largest and oldest banks in India with over 200 years of history. Its shares have gained 33.59% in the past six months and they closed at ₹ 617.00 apiece on the National Stock Exchange (NSE). It has a market capitalization of ₹ 5,45,874 crores.
SBI is one of Jefferies’ top picks in the banking sector. It has a SOTP-based target price of ₹ 760 on the stock. This translates to an upside of 23.17% as compared to SBI’s closing price of ₹ 617.00 on Friday.
Jefferies said that SBI is well-positioned to deliver healthy growth in earnings with an uptick in the topline and low credit costs. Further, it expects SBI to report a ROA (return on assets) of 0.9 per cent and an ROE of 16 per cent in FY24. It said that valuations are attractive at 1.5 times adjusted PB and ROE will aid reasonable compounding.
ICICI Bank Ltd
ICICI Bank is one of the largest private-sector banks in India. It offers a diversified portfolio of financial products and services to retail, SME and corporate customers. It has gained 29.20% in the past six months and its shares closed at ₹ 930.25 apiece on the NSE. It has a market capitalization of ₹ 6,49,914 crores and is a large-cap bank.
Jefferies has a target price of ₹ 1,150 per share for the shares of ICICI bank. This implies an upside of 23.62% from the current levels.
The brokerage believes that ICICI Bank offers the best risk-reward across peers with superior growth, improved asset quality and higher RoEs. It forecast’s the bank to deliver 19% CAGR in profit over FY22-25 and a return on equity (ROE) of nearly 16%. Further, it believes that ICICI Bank is well poised to leverage on growth pick-up in Indian bank credit as well as gain market share in times of tighter liquidity and higher rates.
Written by Simran Bafna
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