Within banks, HDFC Bank and Kotak Mahindra Bank have been consistent in terms of their credit underwriting standards and have not been swayed by the growth quest.
A host of bank stocks including private lenders ICICI Bank Ltd, Axis Bank Ltd, HDFC Bank Ltd and Kotak Mahindra Bank Ltd came under intense selling pressure in Monday’s trade, thanks to the broader weakness in the market. ICICI Bank shares dropped 2.41 per cent to Rs 1,275 and led the BSE Bankex losers. It was followed by Axis Bank, HDFC Bank and Kotak Mahindra bank that fell up to 2.5 per cent. State Bank of India (SBI) and Canara Bank shed 1 per cent each.
Emkay Global said slowing credit growth along with margin contraction and bottoming-out credit cost could weigh on earnings growth for banks, particularly private lenders. The brokerage has ICICI Bank as its top pick within private lenders, given its relatively better growth trajectory and industry-best provision cover that Emkay Global said should help ICICI Bank deliver 2-2.2 per cent return on asset (RoA) despite some moderation in margins.
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“Notwithstanding near-term MFI-related stress, we believe IndusInd Bank could benefit from the rate-cut cycle, given its higher share of fixed rate book including VF, and reasonable valuations (1.6x FY26E ABV). In small-mid cap banks, we prefer Karur Vysya Bank (KVB) followed by Federal Bank, given their reasonable growth trajectory and strong RoA delivery,” Emkay Global said.
The brokerage said it prefers PSU banks, given their limited retail exposure and said SBI and Indian Bank are its top PSB picks.
Within banks, HDFC Bank and Kotak Mahindra Bank have been consistent in terms of their credit underwriting standards and have not been swayed by the growth quest. Axis Bank is focusing on secured loans like Housing (including AHS) and LAP for growth.
“We believe the large PVBs including ICICI Bank, Axis Bank, and IndusInd Bank (mainly VF, including CV and tractors) could be the key beneficiaries of potential growth revival in HL/VF. For HDFC Bank, we believe that managing LDR/deposit growth could be a priority early next year, before its pushes the growth pedal,” the brokerage said.
The overall systemic retail credit growth has moderated to 14 per cent, following regulatory action and rising asset quality concerns in unsecured loans, particularly in low-ticket personal loans ranging from Rs 3-5 lakhs, and also in the Cards segment. The stress and moderation in growth is more prominent in the southern/northern regions. the brokerage noted
