The firm has a weighted ratio on India’s largest lender
(with 15.3% upside potential at a target price of ₹700), as well as Axis Bank (14.3% upside potential at ₹1,000 target).
The banking sector’s value creation – healthy credit demand, margin expansion, and poor credit costs – have all come in handy for the Indian banking sector, setting the stage for a period of healthy growth and profitability,” said senior analyst at Berstein Pranav Gundlapalle. customer note
Indian banks’ ability to deliver sustainable interest margins through the peaks and troughs of rate cycles and strong household loans driving the sector’s credit growth lend credence to its resilient outlook even in an uncertain global macro environment, the firm said.
Bernstein rated the banks on three factors – strong deposit base, scalability and quality of investments in their digital channels.
“We strongly favor HDFB…(it is) a PVB (private bank) with the best deposit division and significant operational potential going forward,” the note read. “Berkesh is valued at a significant discount (~30% to the long-term average) ahead of reunification with its parent,
Ltd. – Based on our assessment of the impact of the merger, the downgrade is unreasonable and is set to reverse soon.”
Since January, it has gained more than 5%, advanced 21%, rose 26% and SBI has increased 28%. The Bank Nifty index has gained 17% during this period.
“What makes India unique is the level of pain the (banking) sector has gone through in the last decade (both in terms of anemic credit growth and balance sheet cleaning) which should result in the continuation of these positive trends in to confirm. a long time,” said Bernstein.
“On credit growth, India’s private sector credit to GDP is actually down 20pp compared to a healthy increase for most others. So it’s not just a multiple of GDP, but also expected is also – which should provide relief on the credit growth track.