'Buy' Rating On These Three Banks: Axis Securities - Check Target Price, Fundamentals

Axis Securities on Banks: The domestic brokerage firm Axis Securities has shared its outlook on the Banking, Financial Services, and Insurance (BFSI) sector for the current financial year (FY2025), giving a BUY rating to three banks and five Non-Banking Financial Companies (NBFCs).

The brokerage firm noted that in Q2FY25, deposit growth for banks has improved, and they are expected to continue focusing on attracting deposits. However, management has underlined that they will avoid offering unreasonably high deposit rates, as they anticipate interest rate cuts to start soon. While the first rate cut was expected in February 2025, there is a chance it could be delayed.  

In the brokerage note, Axis Securities said that the banks are also cautious about lending in risky areas such as credit cards, microfinance, and personal loans, which continue to show stress. Growth in these segments is likely to remain slow. Similarly, the microfinance and commercial vehicle (CV) lending segments may see limited growth until stability returns, which could happen by Q4FY25.  

“In this situation, housing finance companies stand out as a better option, as demand for housing loans remains strong, and their asset quality is stable,” the brokerage firm noted.

ICICI Bank Target Price

According to Axis Securities, the bank reported yet another strong quarter, showing strong credit growth along with healthy margins while also maintaining its asset quality which has allowed it to keep its credit costs largely steady.

“ICICI Bank remains our most preferred pick amongst the banks,” the brokerage note stated.

Target Price Rs 1,500

HDFC Bank Target Price

HDFC Bank has been able to maintain pristine asset quality across cycles and this can be credited to its strong underwriting practices and risk-calibrated lending, the brokerage firm noted. Axis Securities also mentioned that they do not expect any major asset quality challenges and believe credit costs are likely to be contained at around 50 bps over the medium term.

“We expect HDFCB to deliver RoA/RoE of 1.8-1.9 per cent/14-16 per cent over FY25-27E, supported by gradually improving cost ratios and steady credit costs,” Axis Securities said in the report.

Target Price: Rs 2,025

State Bank of India Target Price

Axis Securities shared that the management of State Bank of India has underlined its growth opportunities across segments which continue to remain buoyant and has reiterated its guidance of delivering credit growth of 14-16 per cent in FY25. In its retail portfolio, the largest public sector lender is seeing growth improving across most segments.

SBI is also confident of delivering strong deposit growth of 10-11 per cent in FY25 while maintaining its deposit market share at 22-23 per cent and funding incremental credit growth with incremental deposits.

“With the bank focusing on risk-calibrated growth, we do not expect any major asset quality challenges, thereby keeping credit costs steady at 50-60bps, while gradually normalising over the medium term,” the investment firm stated.

Target Price: Rs 1,040

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