Indian indices are close to their all time highs while strong global cues nudged the indices to strong on a positive note, indices ended weak led by across the board selling. Nonetheless, analysts and brokerages have been bullish on the banking pack and see them offering enough headroom for upside. So, here are few banking stock 'Buy' recommendations by leading brokerages in the country:
1. Bandhan Bank:
This new age Bandhan Bank has been given a ‘Buy' rating by Axis Direct in its report dated June 15 at a price of Rs. 355.
The RBI released a consultative paper for the regularisation of norms for the microfinance sector with the primary focus being on (i) Avoiding over-indebtedness and multiple lending and (ii) Issues related to the pricing of microfinance loans for players. The emerging dynamics in the microfinance sector as well as the concerns of customer protection called for a review of the regulations for all the regulated entities (REs) engaged in microfinance. The recommendations attempt to ensure a level playing field between all the regulated microfinance entities., said the brokerage.
Further the brokerage iterated that it was viewed that the harmonization of guidelines for all microfinance entities would cap the margin at 10 percent plus the cost of funds for banks which would negatively impact their NIMs or net interest margin. But such a limit has not been specified for banks or SFBs. Nonetheless it augurs well for microfinance entities as they will be able to stick to healthy spreads thus boosting their return ratios. Surprisingly, the RBI has tweaked the pricing norms for NBFC-MFIs and proposed to align their pricing with other NBFCs, thus withdrawing the margin capping, added the report.
Also, there was seen a possibility of 2-lender cap to be levied on banks or SFBs, nonetheless the non-applicability of such norms work in the favour of Bandhan Bank and others MFIs in the industry.
ICICI Securities has also placed a ‘Buy' call on the scrip with the target price of Rs. 465 to be realized in a 1-year period. This is a nearly 40% upside from the last closing price of the stock.
The scrip of Bandhan Bank on June 23, 2021 closed over 2% lower at Rs. 333.15 per share on the NSE.
M-cap of the stock is Rs. 53,659 crore, above industry median.
2. RBL Bank:
Emkay Research has placed a ‘Buy' recommendation for the bank with a target price of Rs 255 for a duration of 12 months.
The scrip of RBL Bank last traded at Rs. 208.35.
M-cap - Rs. 12,468 crore.
3. Bank of Baroda:
Brokerage firm ICICI Direct has a buy call on the public sector lender Bank of Baroda for a target price of Rs. 102 in the short term of 3-months. It has seen a gradual build-up of open interest in the last couple of months with the recent price performance. However, there is ample room for further increase in price. We expect further long additions in the stock once it sustains above Rs. 85 levels, said the brokerage.
The stock witnessed noteworthy delivery volume activity in January and May. Fresh delivery based buying was seen around Rs. 70-76. Hence, any declines in the stock can be utilised as a fresh buying opportunity The stock made a 52-week high near Rs. 100 in February 2021. Since then, it has corrected towards its medium term support of Rs. 64 levels. Currently, it has been largely range bound hovering around Rs. 78 and Rs. 86. It failed to sustain above Rs. 85 despite many attempts in the past trading sessions. However, recently, the stock has taken support at lower band level of Rs. 78 and is now witnessing fresh buying momentum.
M-cap - Rs. 42,560 crore
LTP- Rs. 82.3