Samvat 2079: Two shares of private banks are Muhurat chooses this Diwali. here’s why

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According to ICICI Direct’s report, in the banking basket, two private bank stocks are chosen by Muhurat.

In its report on Muhurat’s picks, the brokerage said, “The year 2022 has been marked by volatility due to a wide variety of global new flows ranging from geopolitical issues, to higher inflation (mainly food and energy) and the warmongering action of central banks. This drove down global equities, primarily in the US and Europe. Amidst all this negativity, India has relatively outperformed its global peers in terms of all economic metrics (CAPEX spending, consumer discretionary, robust recovery in banking activity, etc.). The same is reflected in Indian stock markets.”

ICICI Direct sees reasonable opportunities in the overall market, with the key filter being quality.

Here’s why you might buy these two private bank stocks.

Axis Bank:

This private banker is one of the largest private sector banks in India with a balance sheet size of 11.5 lakh crore in June 2022.

In terms of advances, Axis Bank has recorded a CAGR of around 13% over the past five years and is expected to grow at a CAGR of 16.3% in FY22-24E. In addition, the bank is focusing more on the retail segment, which accounts for a share of around 60%, mainly mortgages. More than 80% of unsecured loans are granted to the salaried segment. ICICI Direct said, “We believe that pedaling business growth with a higher share of unsecured lending in incremental business will continue to contribute to higher margins.”

ICICI Direct in its report said, “We believe the additional provisions will be lower, which will lower the cost of credit, thereby increasing profits.” Further, the brokerage added that with capitalization levels high at ~17.8% (Level I at 15.7%), Axis Bank is poised to pedal higher business growth, at the moment. coming.

According to the brokerage firm, the robust business growth, improved operating efficiencies and synergy benefits from the Citi acquisition would positively reflect on the bank’s earnings trajectory and price performance. He added, “We believe Axis Bank will deliver RoA, RoE of around 1.5%, ~15%, respectively, on fiscal 22-24E.”

ICICI Direct has set a buy range for Axis Bank between 780-815 each. The target price set for the bank is 970 each.

On BSE, Axis Bank stock closed at 802.25 each down 0.76% on Thursday. Since the start of the year, the shares have risen more than 15%. However, since the last Diwali, November 4, 2021, Axis Bank shares have jumped nearly 7% to date.

The bank is expected to announce its September 2022 quarterly results on October 20.

Bank of the municipal union:

This Tamil Nadu-based bank is a former private sector bank that mainly focuses on lending to MSMEs and agriculture which accounts for 61% of overall advances. In total, 99% of its advances are of a secured nature.

According to ICICI Direct’s rating, the bank has recorded a CAGR of around 10% in advances over the past five years and is expected to grow at a CAGR of 13% in FY22-24E. With the economy picking up, management has also upgraded its credit growth guidance to 15-18%, which is encouraging. Advances to the top 20 borrowers constitute about 5.3% of total advances (down in recent years), indicating that the bank is focusing on a granular loan portfolio.

After the impact of the Covid lockdowns, City Union Bank’s asset quality issues appear to be receding as additional stress formation remains under control. Due to lower slippages, the bank’s GNPA and NNPA were 4.6% and 2.8% respectively in June 2022.

ICICI Direct’s memo said, “Management has indicated that recoveries and upgrades will be higher relative to the new FY23E slippages. However, higher slippages from the restructured book may be a trouble- Party.”

The brokerage indicated that the bank aims to strengthen its digital platform and the expansion of its branches, which will keep opex high in the short term. The recovery of MSMEs should benefit credit drawdown as well as the recovery of the troubled asset pool. Stable margins at ~4% and healthy business growth will support operating performance and yield ratios.

“We believe City Union Bank will deliver RoA, RoE of ~1.5%, ~13%, respectively, in FY22-24E,” ICICI Direct added, “with a healthy CRAR at ~20 .5% (Level I at 19.4%), the bank is expected to continue its higher business growth in FY22-24E without any significant dilution.”

ICICI Direct recommends buying from City Union within the range of 170-185 per share for a target price of 215 per share.

On the BSE, City Union Bank shares ended at 181.95 each down 1.83% on Thursday. Year-to-date, City Union shares have jumped more than 31%. While since Diwali last year, shares have jumped almost 8% so far.

On BSE and NSE, Muhurat trading will begin in the Equity, Equities and Derivatives segment on the evening of October 24 from 6:15 p.m. and will end after one hour at 7:15 p.m. The pre-opening session will begin at 6:00 p.m. and end at 6:08 p.m.

This Diwali comes in Vikram Samvat 2079 which is the Hindu New Year which started on April 2, 2022.

Disclaimer: The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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