Private lenders such as ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd, IndusInd Bank Ltd and Kotak Mahindra Bank Ltd would soon be reporting their March quarter results starting April 20. Ahead of quarterly results, price targets of these five private banks suggest 10-25 upside potential ahead. This is even all of these banks -- HDFC Bank, Axis Bank, IndusInd Bank, Kotak Mahindra Bank and ICICI Bank, have seen 1.5-5.1 per cent downgrades to their FY25 earnings estimates post December quarter results.
ICICI Bank's average price target at Rs 1,227, as per Trendlyne, suggests 10 per cent potential upside. HDFC Bank's average target price of Rs 1,938 hints at 25 per cent upside potential. Kotak Mahindra Bank's target of Rs 2,073 suggests 16 per cent upside potential. Axis Bank's average target of Rs 1,278 hints at 18 per cent upside; IndusInd Bank's target of Rs 1862 also hints at 19 per cent potential upside.
Top private banking picks by analysts
Motilal Oswal Securties has ICICI Bank and IndusInd Bank among its top private banking picks. Emkay Global said its prefers Kotak Mahindra Bank , followed by RBL, given its still undemanding valuations and management stability. Nomura India said ICICI Bank and Axis Bank are its top picks, other than Federal Bank and state-run State Bank of India.
A host of private banks have reported their provisional Q4 business updates so far. Analysts said HDFC Bank's deposit mobilisation in Q4 was strong , reflecting the strength of the franchise but a continued need to bring down its LDR will weigh on medium-term loan growth.
On IndusInd Bank Ltd, analysts are neutral to positive as the private bank reported 18.3 per cent year-on-year growth in loans and 14.4 per cent growth in deposit. The deposit growth continues to lag loan growth, which is a gap IndusInd Bank still needs to bridge, analysts said.
Q4 results
"While private banks have gained share, state-owned banks are not LDR challenged; hence, they have most likely lost share. We expect non-reporting private banks to have grown their deposits at a healthy pace. IIB posted the weakest retail deposit growth among reporting banks," Nuvama said.
This brokerage expects stable NIM for Axis Bank, HDFC Bank and IndusInd Bank while it expects NIM to decline in single digit for ICICI Bank and Kotak Mahindra Bank in the March quarter.
In the case of HDFC Bank, YES Securities sees profit rising 33.3 per cent YoY to Rs 16,052 crore on 21.6 per cent YoY rise in NII at Rs 28,384 crore. ICICI Bank is seen reporting 22.2 per cent YoY rise in profit at Rs 11,143 crore on 10.5 per cent YoY rise in NII at Rs 19,529 crore. Kotak is seen reporting 5 per cent drop in profit at Rs 3,319 crore, Axis Bank's profit is pegged at Rs 6,634 crore. IndusInd Bank may report 18.6 per cent YoY rise in profit at Rs 2,419 crore, the brokerage said.
What to watch?
For private banks, Nomura India said it would watch out for management comments on loan growth outlooks for the year ahead, especially amid peak system LDR. Investors may watch out for the management comments on moderation in opex outlook for FY25, as operating leverage will be a key lever for FY25 EPS growth amid moderating NIMs, Nomura India said.
"Importantly, credit costs in 4Q for private banks should see some q-q moderation aided by RBI’s relaxation on provisions for AIF investments, while PSUs should continue to see benign trends aided by NPL recoveries," it said.