“We note however that the challenges facing the sector and indeed impediments to stock performance are not exactly existential in nature. We seem to be nearing a trough in the asset-quality cycle and provisioning levels appear demonstrably sufficient. Capitalisation for sector-leading large private banks is more than adequate in our view," it said in a note on Indian banks.
BNP Paribas thinks deposit flows have entrenched a lot of cost-stability advantages that larger banks enjoy. Valuations, while not a bargain, are not in the highest reaches of trading bands either.
BNP Paribas' top stock picks -
HDFC Bank: The global brokerage believes recent headwinds on tech investment news flow create a special opportunity in HDFC Bank as its traditional strengths (CASA tailwinds, best-in-class asset quality) are being somewhat discounted. Its Buy tag on HDFC Bank shares comes with a target price of ₹1,710.
ICICI Bank: ICICI Bank remains a play on credit revival with high provisioning levels, tech investments and continued CASA mobilization, it said with target price of ₹890.
Axis Bank: “We choose Axis Bank for the valuation headroom it offers as well as gearing to a credit cycle recovery through both asset quality and loan growth. Our comfort with AXSB’s provision levels is as high as what we have for ICICIBC’s but recognise that a lower CASA and higher cost of funds ensure that higher rates do not confer an equal amount of competitive benefits on it as on HDFC Bank and ICICI Bank," the note stated. The brokerage's Buy tag on the bank stock comes with a target price of ₹970.
Further, BNP Paribas also has buy ratings on IndusInd Bank (TP: ₹1,030), AU Small Finance Bank (TP: ₹750) and State Bank of India (SBI) with price target at ₹500. Meanwhile, it has Hold recommendations on Kotak Mahindra Bank (TP: ₹1,830) and City Union Bank (TP: ₹130).
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint
