4 Angel Broking Top Banking Picks To Buy For Gains Up To 39%

In the past week, indices ended at a record high and PSU Bank stocks showed traction, while Nifty Bank on the last day traded flat with a positive bias, while Nifty financial services was down. Nonetheless, as banking sector is yet to catch up, here are few recommendations from the space by Angel Broking- the leading brokerage house in terms of active clientele.

Note by and large the broking firm has retained its previous picks from the space with a 'Buy':

Top Angel Broking banking stocks buy recommendations for October 2021

 

Banking and financial services stocks	LTP	Target price	Upside
Federal Bank	85.6	110	28%
HDFC Bank	1603	1859	16%
Shriram City Union Finance	2154	3002	39%
AU Small	1217	1520	25%

1. Federal Bank:

Note the above stock recommendations are based on the fundamental analysis of the scrips and the brokerage has also listed its strong fundamentals in the report:

It is one of India's largest old generation private sector banks. At the end of FY2021 the bank had total assets of Rs. 1.9 lakh cr. with deposits of Rs. 1.56 lakh cr. and a loan book of Rs. 1.2 lakh cr.

Federal Bank has posted a good set of numbers for Q1FY22 despite the second Covid wave as NI/ PPOP increased by 9.4%/21.8% YoY. Provisioning for the
quarter was up by 22% YoY as a result of which PAT was down by 8.4% YoY.

Overall asset quality held up well in Q1FY22 despite the second Covid wave. We expect asset quality to improve from Q2FY22 given continued opening up
of the economy. We expect the Federal bank to post NII/PPOP/PAT growth of22.8%/23.7%/23.2% between FY20-23 and remain positive on the bank.

2. HDFC bank:

This entity is India's largest private sector bank with an asset book of Rs. 11.3 lakh crore in FY21 and deposit base of Rs. 13.4 lakh crore. The Bank has a verywell spread-out book with wholesale constituting 54% of the asset book while retail accounted for the remaining 46% of the loan book.

Q1FY22 numbers were impacted due to the second Covid wave which has led to an increase in GNPA/ NNPA by 15/8bps QoQ to 1.5% and 0.5% of
advances.

Bank posted NII/PPOP/PAT growth of 8.6%/18.0%/16.1% for the quarter despite higher provisioning on the back of strong loan growth of 14.4% YoY.

The management has indicated that 35-40 days of collections had been lost but expects healthy recoveries from slippages in 2QFY22 which should lead to lower credit costs going forward. "Given best in class asset quality and expected rebound in growth from Q2FY22 we are positive on the bank given reasonable valuations at 3.0xFY23 adjusted book which is at a discount to historical averages", adds the brokerage firm.

3. AU Small- Buy for 39% Upside as loan growth may lead to re-rating of the scrip:

It is one of the leading small finance banks with AUM ofRs. 34,688 Cr. at the end of Q1FY22. Wheels (auto) and SBL-MSME segment accounting for37% and 39% of the AUM respectively.

Q1FY22 numbers were better than expected as the despite the impact of the second Covid wave. AU reported NII/PPOP/PAT growth of 40.4%/1.2%/1.2%
respectively in Q1FY22 while GNPA/NNPA ratios stood at 4.3%/2.3% of advances as compared to 4.3%/2.2% in Q4FY21.

Collection efficiency remained strong during April/May/June at 95%/94%/114% respectively while GNPA remained stable at Rs. 1503 cr. sequentially. Given stable asset quality, we expect loan growth to pick up in Q2FY22 which should lead to a rerating for the bank.

4. Shriram City Union Finance:

Part of the Shriram group, the company is in the highmargin business of lending to small businesses which account for 57.3% of the loan book as of end FY20. The company also provides auto, 2-wheeler, gold,and personal loans.

The company posted a good set of numbers for Q1FY22 quarter due to positive surprise on the asset quality front. NII for Q1FY22 was up by 5.23% YoY to Rs.920 crores while PPOP was up by 0.4% YoY to Rs. 569 crores. Provision during the quarter was down by 6.5% yoy to Rs. 290 crores while profits were up by
8.1% yoy to Rs. 208 crores.

Flattish AUM at Rs. 29,599 crores in the last concluded quarter. SCUF reported only marginal deterioration on asset quality front as Gross stage 3 loans increased by 54bps qoq to 6.91% while net stage 3 for the quarter increased to 3.46% while PCR ratio stood at 49.9%.

Disclaimer:

The above stocks are picked from the brokerage report of Angel Broking. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.