Bank stocks: Price targets for select bank stocks swell by up to 57%

Mumbai: ICICI Securities has raised its share price targets on Indian banks by as much as 57 per cent as it believes long-term growth and value drivers are offsetting the immediate disruption in the sector. The brokerage downgraded its rating on Kotak Mahindra Bank to ‘hold’ and on AU Small Finance Bank to ‘add’.

ICICI Securities raised the targets on HDFC Bank, Axis Bank, SBI, IndusInd Bank, Bandhan Bank, Federal Bank, DCB Bank, Kotak Mahindra Bank, City Union Bank and YES Bank by 13-57 per cent

The brokerage said with HDFC Bank providing around 20 per cent upside, it has inclined its preferences more towards Axis Bank, SBI, Bandhan Bank and Federal Bank. The brokerage said the economy is recovering faster and a rebound in lead indicators suggests the crisis is not as severe and prolonged as anticipated.

The sector is at the cusp of releveraging that will drive credit growth in double digits from financial year 2021-22 onwards, said ICICI Securities, adding that easy monetary policy, excess liquidity are also lowering the cost of credit.

The Bank Nifty collapsed 45 per cent between January and March and is up over 80 per cent from March lows. “All this, coupled with ample resources with financiers set the stage for CY21 to be a turning point to expansionary phase,” said ICICI Securities.

The brokerage said Covid-19 disruption is not very different from the earlier disruptions but a differentiating aspect this time is financiers’ proactiveness and agility to deal with the turbulence and ensure no long-drawn effect on earnings outlook.

ICICI Securities said financiers this time have created a war chest of liquidity, deposits, capital and credit contingency buffers – much in advance to bear the brunt of economic and credit cycle disruption.