Most analysts tracking the banking industry believe the worst has passed for India’s banks concerning asset quality and loan growth.Banks have focused on balance sheet strengthening and steadily building their provisions in the past, Pankaj Pandey, the head of research at ICICI Direct, said in a note. “The retail segment has been the driver of credit offtake and continues to remain so, coupled with agriculture and the micro, small, and medium enterprise segment.”
ICICIDirect’s top two banking stock picks include ICICI Bank and State Bank of India. Let’s look at these two banking stocks in detail.
ICICI Bank
ICICI Bank is the top private bank in India, well-known for its premium quality services. Over the years, the bank has seen a solid annual EPS growth. Meanwhile, its RoE has improved in the past two years showing that the bank effectively uses shareholders’ funds.
For the October-December quarter, ICICI Bankreported a 25% rise in its year-on-year (YoY) profit to Rs. 6,194 crore. During the same period, its net interest income rose by 23%. Plus, non-interest income and other income also witnessed a 25% hike.
It logged the lowest NPA ratio since March 2014. The NPA ratio was down from 0.99% in September 2021 to 0.85% in December 2021.Moreover, the bank has consistently reported an improvement in its numbers sequentially. Its revenue has increased every quarter for the past four, with its core business showing operationally improving traction.
Consequently, some brokerages see a 50% upside in ICICI share price. ICICI Bank shares have also shown some good momentum recently.
The ICICI Bank share price has stayed above short, medium, and long-term moving averages.
SBI
State Bank of India, India’s largest bank, is among the best banking stocks, with a balance sheet of Rs. 48 lakh crore. Its share price has surged over two times in the past five years. In the past few years, the bank has strengthened its balance sheet while improving its return ratio. Brokerages see a 40% upside in SBI’s share price.
For the third quarter of FY22, India’s largest public-sector bank had reported a 62% surge in its net profit YoY to Rs. 8,431 crores. It had logged a 6.48% rise in its net interest income for the October-December period.
During the same period, it had also reported a decline to 4.5% in its gross non-performing asset ratio, while its net non-performing asset ratio was down by 18 basis points sequentially to 1.34%. ICICIDirect has a ‘buy’ rating on the stock with a target price of Rs. 650 on the back of “overall strength in liability franchisee, over 9% guidance on growth and improving return ratios with return on equity touching 12%.”
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https://www.icicidirect.com/stocks/icici-bank-ltd-share-price https://www.icicidirect.com/research/equity/state-bank-of-india/3981
