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Buy 3 Banking Stocks As Suggested By 2 Brokerages For Return Up To 27%

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2 Leading brokerages Motilal Oswal and Kotak securities has recommended 3 banking stocks to buy. These stocks are Axis Bank, Canara Bank, Union Bank of India. If you buy the stocks now, you can fetch a potential return of up to 27%. Check key takeaways below:

 

1. Axis Bank Ltd
 

1. Axis Bank Ltd

The current market price of Axis Bank is Rs 902 apiece with a 52-week high at Rs 919 and 52-week low at Rs 618 apiece, respectively. The bank has a market capitalisation of 2,77,407.04 crore. Kotak Securities has given buy rating to the stock with a target price of Rs 1120 apiece with a potential return of 22%.

According to Kotak Securities, "Q2FY23 for AXSB was a robust quarter led by strong earnings and overall business momentum. Axis Bank has been focusing on building a strong retail portfolio. Axis Bank has performed strongly in terms of NII & operating profits led by multiple key drivers. We expect Axis Bank to sustain the current NIMs led by focusing on improving the balance sheet mix. As 68% of the loan mix is floating in nature, the bank is well-positioned to benefit from the rising interest rate scenario. The fee income will continue to remain healthy with improving business momentum. We expect the bank to invest in branch expansion, manpower & digital capabilities to maintain tight cost control, which will drive the operating performance. We do not expect any negative surprises on the asset quality front. The earnings growth momentum will continue, driven by healthy operating profits & lower provisions."

We expect ROE/ ROA to reach 16.5%/ 1.8% by FY24E from 12.0%/ 1.2%, respectively in FY22, led by consistent performance. We have factored CAGR of 16.7% in advances, 22.8% in NII, 23.3% in PPOP, and 36.8% in PAT over FY22-24E, driven by strong trends in business momentum & improving operating performance. We revise our target price to INR 1,120 per share (earlier INR 936), applying 2.2x P/ABV multiple to an adjusted book value of INR 509.5. This implies an upside of 23.2% over the CMP. We maintain our rating on the share of AXSB at "BUY", added Kotak Securities.

2. Canara Bank

2. Canara Bank

Leading brokerage Motilal Oswal has recommended buy rating to the stock with a target price of Rs 340 apiece and a potential return of up to 20% The current market price of Canara Bank is Rs 284 apiece with an intraday gain of 5.22%. The stock's 52-week high is Rs 287 and 52-week low is Rs 171 apiece, respectively. The banking company has a market capitalisation of Rs 51,575.72 crore.

According to Motilal Oswal, "Canara Bank reported a healthy operating performance supported by continued traction in loan growth and improvement in asset quality while expansion in margins drove NII. The bank expects margins to remain healthy given the rising rate environment. Loan growth was led by the corporate segment and the outlook is encouraging as CBK is looking for a decent double-digit growth in FY23E. Slippages were flat sequentially, thus asset quality ratios improved further underpinned by higher recoveries and upgrades. Decline in SMA overdue and restructured portfolio provides incremental comfort on asset quality trends. We increase our PAT estimates by 17%/19% for FY23/24, respectively, to account for higher NII, other income, loan growth and lower tax rate. We estimate an RoA/RoE of 1.0%/16.2% by FY24E. Maintain BUY with a revised TP of INR340 (premised on 0.8x FY24E ABV)." 

3. Union Bank Of India

3. Union Bank Of India

Motilal Oswal has assigned buy rating to the stock with a target price of Rs 65 apiece with a potential return of 27%. The current market price of the stock is Rs 51.65 with an intraday gain of 5.84%. The bank has a market capitalisation of Rs 35,301 crore.

According to Motilal Oswal, "Union Bank reported a healthy 2QFY23, with the earnings beat driven by healthy NII and other income and tax reversals, though provisioning remained elevated. Fresh slippages significantly moderated on a sequential basis. This, coupled with a low SMA book (0.57%) and controlled restructuring (2.6%), provides a better outlook on asset quality. Loan growth has picked up and was aided by all segments: Corporate, Agri, Retail, and MSME. We revise our FY23 PAT estimate by 14%, the same for FY24 remains largely flattish. This is driven by higher NII and other income and lower tax expense, offset by elevated provisioning. We estimate a RoA/RoE at 0.8%/13.9% by FY24. We maintain our Buy rating, with a TP of INR65 (0.6x FY24E ABV)."

Disclaimer

Disclaimer

The stocks have been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.

 

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