Stating that LDR-led growth disparities are likely to become more pronounced, global brokerage firm Nomura picked ICICI Bank, SBI, Kotak Mahindra Bank and Federal Bank as its preferences in the banking sector ahead of the Q1FY25 results.
The global brokerage firm has a buy rating for all its preferred picks with a target price of Rs 1,335 for ICICI Bank, Rs 2,000 for Kotak Bank, Rs 1,000 for SBI and Rs 195 for Federal Bank.
Among the large private banks, Nomura believes that ICICI Bank and Kotak Mahindra Bank stand out as the only ones that can comfortably report a greater-than-16% YoY loan growth in 1QFY25 while among the mid-sized private banks, Federal Bank’s performance clearly stands out with strong delivery on loans and deposits.
“Among PSUs, we expect loan growth for SBIN to remain strong (16% y-y in 1QFY25F),” said Nomura in its report.
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The above-mentioned private banks also happen to be the ones with the lowest loan-to-deposit ratios in Nomura’s coverage while, on the other hand, banks with relatively higher LDRs have seen softer loan growth trends as per their pre-1Q updates.
“We believe NIMs of large private banks (which peaked in 4QFY23) should witness a gradual compression in 1QFY25F led by moderation in CASA and re-pricing of term deposits,” said Param Subramanian, Analyst at Nomura.
For PSU banks, quarter-on-quarter (QoQ) NIM moderation should be lower, supported by late cycle re-pricing of MCLR linked loans and a stable loan-to-deposit ratio (LDR), added Subramanian.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
