Indian benchmark indices are notching new highs with Nifty now close to 15,900 levels. Stock market experts still maintain a bullish outlook and expect the banking and financial space to continue to contribute to the gains of the headline indices. So, if you are looking to buy banking stocks, here are top recommendations by Angel Broking:
Banking Stocks To Buy Now By Angel Broking:
In its elaborative research report released for the month, Angel Broking has come out with top stock picks from the different sectors. Here we focus on the banking space.
|Company||CMP ( at the time of recommendation i.e. CP of June 4)||TP|
|Federal Bank||Rs. 88||Rs. 110|
|IDFC First Bank||Rs. 60||Rs. 77|
|Shriram City Union||Rs. 1669||Rs. 2100|
1. Federal Bank:
Kochi-based Federal Bank is a leading commercial bank in the private space. The bank also has international presence in Abu Dhabi, Dubai, Oman, Kuwait etc. Total assets at the bank at the end of FY21 stood at Rs. 1.9 lakh crore, deposits had been at Rs. 1.56 lakh crore while the bank's loan book was at Rs. 1.2 lakh crore.
For the Q4 quarter of FY21, the company's loan book registered 7.9% YoY growth owing to strengthening of the retail portfolio. NIM as well as NII too registered an increase, with NII growing by a strong 16.8% YoY to Rs. 1437 crore.
"NPA's have remained steady for the bank over the past few years with GNPA for Q4FY21 at 3.41% while NNPA ratio stood at 1.19%. PCR at the end of FY21 stood at ~65% which we believe is adequate. Total restructured book stood at Rs. 1409 crore at the end of Q4FY21. This is against earlier expectations of total restructuring of Rs. 3,000-3,500 crore", added the report.
Key financials for FY2022E
NII- Rs. 7156 crore
NIM - 3.3%
PAT- Rs. 2311 crore
EPS- Rs. 11.6
2. IDFC First Bank:
This is the new age private banking firm in the country that other than offering basic banking services including deposits and loan is also into offering investments such as mutual fund, gold bonds etc.
"IDFC Fist Bank, Post management change has clearly outperformed in building liability franchise and retail lending. Since new management took charge, every qtr. liability franchise has been strengthened. CASA ratio improved from 10.4% in Q3FY19 to ~43% In Q4FY21. NIM's have also been stable for the bank despite interest reversals in Q4FY21", said the report.
Now as banks will see less of inflow coming from the asset side, the ability to raise funds at low cost shall be the key parameter that will drive banking space from here on. In April this year, the bank raised fresh equity worth Rs. 3000 crore.
For the last quarter ended March 2021, the bank posted a 78% jump in its net profit at Rs. 128 crore. In the corresponding quarter in the year ago period, the profit stood at Rs. 72 crore. For the full year 2021, the profit stood at Rs. 452 crore versus loss of Rs. 2864 crore in the previous fiscal. The stock last traded at a price of Rs. 59.85 per share on the NSE.
Key financial metrics for FY22E
NII- Rs. 8488 crore
EPS- Rs. 2.5
PAT- Rs. 1425.8 crore
3. Shriram City Union
The leading NBFC from the house of Shriram Group offers specialized services in MSME and retail lending. The major portion of the company's loan book comprises small business accounts as of FY 2020 end. Also, the company extends 2-wheeler, auto, personal and gold loans.
"The company posted a good set of numbers for the quarter due to positive surprise on the asset quality front. NII for Q4FY21 was up by 3.2% YoY to Rs. 928.5 crore while PPOP was up by 7.2% YoY to Rs. 551 crores. Provision during the quarter was down by 47.4% yoy to Rs. 163.8 crore while profits were up by 84% yoy to Rs. 282 crores. Shriram City Union reported a strong 6.0% sequential growth in disbursement for the quarter which led to a 3.9% qoq growth in AUM to ~ Rs. 29,571 crore", said the report.
"SCUF surprised positively on the asset quality front Gross stage 3 loans decreased by 9bps qoq to 6.37% in Q4FY21. Net stage 3 for the quarter declined to 3.08% while PCR ratio stood at 51.6%", added the report.
Key metrics FY2022E
NII- Rs. 4295 crore
PAT- Rs. 1343.8 crore
EPS- Rs. 203.6