SBI, ICICI Bank, Kotak Bank, AU Small Finance Bank can give up to 46% return; should you buy?

Global brokerage firms are bullish on bank stocks after bank credit sectoral deployment data for May’22 suggested year-on-year (YoY) uptick across all verticals.  

As per monthly sectoral deployment data, Overall retail credit continues its momentum registering 0.7% MoM accretion, up 16.4% YoY. 

"Of the monthly incremental retail credit accretion of Rs248bn in May’22, 11% was contributed by housing, 19% by vehicle loans while the bulk of it (74%) was other retail loans," highlighted brokerage firm ICICI Securities.  

It was of the view that given the overall normalisation visible in most sections of the economy, retail credit growth can be sustained in mid-to-high teens. 

Also, vehicle loan portfolio was up 1.2% MoM. This was after MoM growth of 2.7% MoM in Apr’22, 22.2% in Mar’22 and 17.1% in Feb’22.  

Besides, credit card portfolio also saw an uptick of 0.3% MoM, 4.3% YTD and is now up 30.1% YoY.  

"This reflects not only normalisation of consumption-related spending, but it also seems there is rise in revolver and EMI facilities," said the brokerages.  

It believes revival in consumer demand, rise in private capex followed by rise in government spending can be potential triggers for industry credit growth and these could turn out to be key catalysts for overall credit growth revival. 

Meanwhile, global brokerage houses have remained bullish on ICICI Bank, State Bank of Indian (SBI), Kotak Bank and AU Small Finance Bank. Below are the ratings and targets assigned by major global analysts on these banking stocks.  

ICICI Bank, CMP: Rs 720.10 

Brokerage house CITI maintained a buy on ICICI Bank with target price of Rs 950 per share. Macquarie pegs target price of Rs 1000 with an outperform rating, while Nomura, which also maintained a buy tag with Rs 960 target.  

SBI, CMP: Rs 473.45 

Macquarie gave an Outperform rating with target price of Rs 665 a share on the State Bank of India stock, while Nomura maintained a buy and sees a target price of Rs 615 per share.     

Kotak Bank, CMP: Rs 1670.90 

Global brokerages CITI and Macquarie both maintained a neutral stance on this private bank stock. The former gave a target of Rs 2000, while the latter sees the stock hitting Rs 1860 mark in a year.  

AU Small Finance Bank, CMP: Rs 563.45 

Morgan Stanley maintained an overweight rating with a target price of Rs 825 for AU Small Finance Bank shares.