Up to 50% upside: IDBI Capital Market bullish on these banks, NBFC and housing finance majors

Brokerage IDBI Capital Market is bullish on select private sector banks, non-banking finance corporations and housing finance companies amid the ongoing credit growth momentum. In its report on March 1, the financial services firm said the credit growth, after witnessing a downtick in December 2022 at 15.30 per cent, it again bounced back during January 2023 and came to 16.70 per cent.

The major segments such as agriculture (14.4 per cent), services (21.5 per cent) as well as a retail loans (20.4 per cent) witnessed healthy growth momentum in January. The brokerage added that banking credit growth improved to 9.7 per cent YoY in FY22 against 5.6 per cent a year ago. It further improved to 17 per cent YoY as of January 2023 led by a shift of corporate borrowings towards banks and better consumption-led demand.

Considering the present market condition, IDBI Capital Market has set a target price of Rs 1,630 for IndusInd Bank, indicating an upside of nearly 50 per cent from the current market price. It is also bullish on HDFC Bank Ltd (target price: Rs 2,070), Axis Bank Ltd (Rs 1,120), DCB Bank Ltd (Rs 150), Federal Bank Ltd (Rs 175) and ICICI Bank Ltd (Rs 1,260).

“We expect credit growth to moderate slightly towards the end of FY23 led by the base impact of the corresponding year and better corporates to shift back to bond market borrowings. Further, we expect credit growth to be around 15-16 per cent (vs 17 per cent as of Jan’23) for FY23,” IDBI Capital Market said in a report.

The private sector banks' market share has been steadily increasing over the quarters. Data provided by IDBI Capital showed that the market share of private sector banks have improved to 38.40 per cent as of September 2022 against 35.30 per cent in June 2020. On the other hand, market shares of PSUs have declined to 56.10 per cent from 59.60 per cent during the same period.

“We believe as there has been a consolidation of public sector banks and the private peers continue to outperform with respect to credit growth along with a rigorous focus on the asset quality,” IDBI Capital Market said.

The brokerage is also bullish on NBFCs including Cholamandalam Investment and Finance Company (target price: Rs 930), Mannapuram Finance (Rs 148) and Muthoot Finance (Rs 1,140). Among the housing finance company, it prefers HDFC (Rs 3,140) and Repco Home Finance (Rs 290).

With a fall of 5.67 per cent YTD, the BSE Bankex has underperformed the benchmark equity index BSE Sensex (down 2.35 per cent). The BSE Bankex declined to 46,131.28 on March 1 from 48,906 on December 30 last year.

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