Banking Stocks To Buy: Emkay Global Picks 2 Over 100 Years Old Companies, 20% Likely Return Seen

Emkay Global has recommended investors to buy banking stocks. These stocks are Indian Bank and City Union Bank. If you buy Indian Bank at the current market price of Rs 259 apiece, you will receive maximum potential return of 20%. Emkay global has suggested investors to buy City Union Bank with a potential return of 16%. It is worth noting that both the banks are over 100 years old. Check key takeaways below:

1. Buy Indian Bank

Emkay Global has given buy call to Indian Bank with a target price of Rs 310. The current market price of Indian Bank is Rs 259 apiece. Buy Indian Bank at the current market price of Rs 259 to receive potential return of 20%. According to Emkay Global, "We raise our earnings for FY23-25E by 6%-14% (respectively) and expect the bank to claw back RoA/RoE of 1%/15% by FY25E on the back of better growth/margins and lower LLP. We retain our BUY rating on the stock, with revised TP of Rs310/sh (earlier Rs210), based on 0.8 Sep-24E ABV vs our earlier 0.6x Jun-24E ABV."

Indian Bank reported healthy core-operating profitability (up 22% YoY), led by healthy margin/other income, albeit partly offset by higher staff costs. Bank expects staff cost to remain elevated in H2 due to provision towards new wage cycle (as negotiations will begin soon), which will be largely offset by better NII growth, lower LLP and tax benefit to drive up RoA, added Emkay Global.

The current market price of Indian Bank is Rs 259 apiece with an intraday gain of 4.17%. The banking company has a market capitalisation of Rs 32,362.79 crore. The maximum return is 104% in the last 3 years. The banking company was incorporated in 1907.

2. Buy City Union Bank

Emkay Global has given buy rating to City Union Bank with a target price of Rs 228 apiece. The current market price of the banking stock is Rs 196 apiece with market capitalisation of Rs 14,506 crore. If you buy City Union Bank at the current market price of Rs 196, you will get a potential return of 16%. The stock has given a maximum return of 31% in last 5-years. It came into existence in 1904.

According to Emkay Global, "We expect the bank to claw back its highest RoA/RoE so far, of 1.6%/15%, aided by accelerating growth, healthy margins and lower LLP. We retain BUY with revised TP of Rs228/share (Rs200 earlier), based on 2x Sep-24E ABV."

CUBK reported a strong 26% beat on PAT at Rs2.8bn (up 23% YoY) and its best-ever RoA of 1.7% (reported) in Q2. This was mainly led by sharp improvement in margins (up 14bps QoQ to 4.1%) and lower LLP, as NPAs continue to trend down.

 

Disclaimer

The stocks have been picked from the brokerage report of Emkay Global. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.