04 Jul , 2022 By : Kanchan Joshi
As per brokerage firm Axis Securities, FY23 appears promising for the BFSI sector as most of the Banks/NBFCs under the brokerage's coverage remains well-placed to capitalize on the growth opportunities.
“Outlook on the asset quality front remains encouraging with expectations of slippages moderating and recoveries remaining healthy thereby aiding asset quality improvement. We believe the growth momentum to remain healthy but delays in the investment cycle may impact the overall growth in the near term," the note stated.
Axis Securities believes with the asset quality pain being largely behind (barring certain segments) and the restructured book behaving fairly well, a ramp-up in credit growth and the ability to maintain margins in an increasing interest rate environment is likely to drive valuations for Banks/NBFCs moving forward.
It has maintained its Equal Weight stance on the banking sector. Its top stock picks are ICICI Bank with target price of Rs1,000, State Bank of India or SBI (TP: Rs665), and Federal Bank Ltd (TP: Rs115) and has Buy recommendations on the bank stocks.
“ICICI bank has been outperforming its peers and has been ticking most boxes on growth, margins and asset quality, Higher loan growth, improving operating profits, and a strong provision buffer coupled with a strong deposit franchise will help the bank achieve ROAE/ROAA expansion over FY23-24E. On the valuation front, we believe the bank continues to be on a comfortable footing," Axis Securities said.
Amongst the PSU banks, SBI remains the best play on the gradual recovery of the Indian economy on account of its healthy PCR, robust capitalization, a strong liability franchise, and an improved asset quality outlook, as per the brokerage.
“Key positives for Federal Bank are increasing retail focus, strong fee income, adequate capitalization, and prudent provisioning. We expect steady provision requirements along with healthy growth in the balance sheet," it added.
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