3 bank stocks to buy as recommended by Axis Securities for this month

“Outlook on the asset quality front remains encouraging with expectations of slippages moderating and recoveries remaining healthy thereby aiding asset quality improvement. We believe the growth momentum to remain healthy but delays in the investment cycle may impact the overall growth in the near term,” the note stated.

Axis Securities believes with the asset quality pain being largely behind (barring certain segments) and the restructured book behaving fairly well, a ramp-up in credit growth and the ability to maintain margins in an increasing interest rate environment is likely to drive valuations for Banks/NBFCs moving forward. 

It has maintained its Equal Weight stance on the banking sector. Its top stock picks are ICICI Bank with target price of ₹1,000, State Bank of India or SBI (TP: ₹665), and Federal Bank Ltd (TP: ₹115) and has Buy recommendations on the bank stocks.

“ICICI bank has been outperforming its peers and has been ticking most boxes on growth, margins and asset quality, Higher loan growth, improving operating profits, and a strong provision buffer coupled with a strong deposit franchise will help the bank achieve ROAE/ROAA expansion over FY23-24E. On the valuation front, we believe the bank continues to be on a comfortable footing,” Axis Securities said.

Amongst the PSU banks, SBI remains the best play on the gradual recovery of the Indian economy on account of its healthy PCR, robust capitalization, a strong liability franchise, and an improved asset quality outlook, as per the brokerage.

“Key positives for Federal Bank are increasing retail focus, strong fee income, adequate capitalization, and prudent provisioning. We expect steady provision requirements along with healthy growth in the balance sheet,” it added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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