Large Private Sector Banking Stock Crashes To 52-Week Lows, Should You Buy?

The shares of Bandhan Bank, a top large private sector bank has crashed to new 52-week low of Rs 206.30 on the National Stock Exchange. The bank has nearly 5,807 banking outlets spread across 34 out of 36 states and union territories in India.

Banking stocks come under tremendous selling pressure

It's not only that Bandhan Bank has fallen, but, the Bank Nifty and several banking stocks have come under intense selling pressure. The worries over the SVB Bank collapse spreading has led to banking stocks across the globe falling. In any case, Bandhan Bank has now dropped to Rs 207.80 from a high of Rs 349 we saw on the stock in May of last year.

Should you buy the stock of Bandhan Bank?

In a report earlier in January, Emkay Global noted that Bandhan Bank once again reported a miss on PAT, at Rs2.9bn (vs our est of Rs5.8bn), mainly due to weaker margins and higher provisions, partly offset by recovery from sale of NPAs to ARC (Rs4.1bn) and the CGFMU recovery. Bank guides for better growth/NPA recovery hereon, which will lead to improvement in earnings.

"We cut our FY23E earnings, factoring-in the miss in 3Q, but expect improvement in the RoA to 1.5%-2.6% and in RoE to 12%-22% over FY23-25E, respectively, owing to better growth/asset quality. We retain our BUY rating on the stock, with target price of Rs 300 (based on 1.9x Dec-24E ABV), given the expected improvement in asset quality/earnings trajectory from 4Q and reasonable valuations," Emkay Global had said.

Anand Rathi in a January report initiated coverage on Bandhan Bank with a BUY rating and a target of Rs 327, valuing the bank at 1.9x FY25e ABV. If we see, both the target prices from Anand Rathi and Emkay Global is significantly higher from the current levels.

Disclaimer

The buy calls on the stocks are picked from the brokerage reports of Emkay Global and Anand Rathi of Jan 2023. The article should be treated as informational and not an advisory to invest. Neither the author, nor Greynium Information Technologies Pvt Ltd nor the brokerage house, should be held responsible for decisions based on this article.