3 Banking Stock Picks As Recommended By PL Ahead Of Quarterly Numbers

Broking firm Prabhudas Lilladher has recommended Axis Bank, HDFC Bank and DCB Bank as its top picks in its latest report on the April-June earnings preview for the banking sector.

"Banks in our coverage are expected to see a weak quarter as core earnings could fall by 5.8% QoQ to Rs512bn (vs +16.6% QoQ in Q4'23), mainly driven by lower NIM and higher provisions. Loan growth might come in at 2.1% QoQ (3.8% in Q3FY23), while deposit accretion could be tad better at +2.3% QoQ (6.2% last quarter). We expect NIM to decline by 8bps QoQ (flat in Q4'23) to 3.84%," Prabhudas Lilladher has said in its report.

Buy HDFC Bank with a target price of Rs 2024

According to Prabhudas Lilladher, the overhang of the merger is over and HDFC Bank could see better NII trajectory to peers as 50%+ of the portfolio is fixed rate. Although loan growth at 1.0% QoQ was muted for the quarter, retail loan mix is improving as retail grew by 4.0% QoQ. NIM fall of 3bps QoQ would be lower for HDFC Bank compared to our universe (-8bps). "Valuation at 2.3 times on core FY25E ABV suggests a discount of 5% to ICICI Bank. We maintain 'BUY' and raise target price from Rs 1,925 to Rs 2,025 due to earnings upgrade of 1.5% for FY24/25E and recent up-move in HDFC Life," the brokerage has said.

Buy Axis Bank with target price of Rs 1140

According to Prabhudas Lilladher, while provisions may rise from 15bps to 50bps QoQ, Axis Bank could create contingent buffers. Discount to ICICI Bank has slightly increased to 26% (range 20-22%) and valuation is attractive at 1.8xon FY25E ABV. Retain 'BUY' at target price of Rs 1140," the brokerage has stated.

Disclaimer

The above article is for information only. The stock recommendations are picked from the brokerage report of Prabhudas Lilladher. This is not a recommendation of either Greynium Information nor the author. Neither Greynium Information Technologies, nor the author should be held responsible for losses caused based on a decision from the article.