Anand Rathi’s Q3 Review: Large Private Banks Outperforming Others, Favors ICICI Bank and SBI among Top Picks in BFSI Sector

In recent news, Anand Rathi, a brokerage firm, has voiced its belief that large-cap private banks in the BFSI (Banking, Financial Services, and Insurance) sector offer a better risk-reward opportunity compared to other entities. This belief is rooted in the government’s decision to ease its financial constraints, thus improving banking liquidity and bolstering the underlying credit demand. Anand Rathi has singled out ICICI Bank, Axis Bank, State Bank of India, and Bank of Baroda as top picks, alongside NBFCs Cholamandalam Finance and Poonawalla Fincorp.

According to the brokerage’s assessment of the BFSI space following the December quarter results, several key trends and takeaways have emerged. These include the performance and future outlook of large private banks, public sector banks, old private sector banks, and NBFCs.

Large private banks have demonstrated faster domestic loan growth in comparison to public-sector banks. While NIM compression trend continued in Q3, the balance sheet’s liquidity remained stable. Similarly, public sector banks have showcased slower loan growth than the entire system, but overall profitability has been positively impacted by credit costs. Moreover, old private sector banks have experienced faster loan growth, particularly in the retail segment. Overall profitability and liquidity have remained strong in this segment.

In terms of NBFCs, robust loan growth has been driven by consumer finance and unsecured lending, ensuring strong NII growth. Furthermore, the observed rise in the cost of funds has been less prominent for NBFCs in Q3 compared to banks.

The brokerage also provided specific insights into the performance of individual stocks within the BFSI sector. ICICI Bank, Axis Bank, State Bank of India, Cholamandalam Finance, and Poonawalla Fincorp were analyzed, with Anand Rathi offering recommendations and target prices for each of these stocks.

It is important to note that the views and recommendations provided by Anand Rathi are not representative of Mint’s stance. It is recommended that investors consult certified experts before making any investment decisions.

Source: Mint (Published on 13th Feb 2024, 04:11 PM IST)