Sharekhan has suggested buying the stocks of ICICI Bank, HDFC Bank, Axis Bank and SBI among its top picks from the large cap banking sector space in its latest Q2FY2022 Results Preview.
Stocks to buy from the banking sector
"We are positive on private banks and select PSU banks. Within private banks, our pecking order is ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank. Among PSU banks, we retain a preference for SBI, but believe that one can start exploring value in other large PSU banks like Bank of Baroda," the brokerage has said.
For ICICI Bank, which the brokerage has a buy call on it expects loan growth at 20% y-o-y to drive NII growth (11%y-o-y). According to Sharekhan the Net Interest Margins for ICICI Bank would remain stable at 3.8%.
For Axis Bank, the brokerage expects loan growth at 10% y-o-y led by retail and SME loans. It sees NIM to remain stable at 3.5-3.6%.
Divergence on asset quality side
According to Sharekhan, the asset quality is expected to stabilise in PSU banks and show an improving trend in private banks.
"In addition, for PSU banks, the recovery from DHFL could get set off by provisioning for Srei group. However, we expect a better commentary on outlook especially related to asset quality for H2 of the fiscal. Thus, the credit cost is likely to moderate in the coming quarters," the brokerage has said.
"Private sector banks are likely to outperform, with a relatively better growth in advances and lower provisions, keeping credit cost in under control. Within private banks, ICICI Bank, Kotak Mahindra Bank and HDFC Bank are better placed than peers," the brokerage has said.
The above stocks are picked from the brokerage report of Sharekhan. 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.