3 Bank Stocks Emkay Recommends For An Upside Of Upto 42%

Emkay Global Financial recommends a "buy" call on Axis Bank, Canara Bank and Karur Vyasa Bank. As one of the leading broking firms, it has seen a potential upside of upto 42% from these banks based on their recent results. All the three banks posted their quarterly numbers and they have been good.

Axis Bank: Emkay Global Financial recommends a “buy” call with a target price of Rs 1300

According to Emkay Global, Axis Bank is poised to grow upward. "We revise our earnings estimates upward for FY23/FY24/FY25 by 7%/4%/2%, and expect the bank to deliver 1.7-1.8%/17% RoA/RoE by FY25E. Given its improving core-profitability, RoE profile and Management stability, we revise our TP multiple for the bank to 2.1x Dec-24E ABV." As per the quarterly numbers its Net interest margin (NIM) has jumped by 30 basis points(bps) to 4.3%, simialr to its peers. This was largely attributed to mix of better portfolio, asset re-pricing, interest recognition on earlier restructured loan and drop in average LCR. Its Gross slippages were elevated at Rs38bn/2.3% of loans but so were recoveries, leading to only a 12bps QoQ contraction in the GNPA ratio to 2.4%.

Canara Bank: Emkay Global Financial recommends a “buy” call with a target price of Rs 385

"We raise our earnings by 18-28% over FY23-25E, factoring-in better margins, higher recovery from written-off accounts and lower tax rate. We now expect RoA/RoE to improve to 0.9%/17% by FY25E (without considering capital raise). We retain BUY on the stock, with a revised Target price of Rs 385/share", Emkay Global Financial stated in its report. Canara bank's recent numbers shows that the credit growth has been decent at 18 % year-on-year and 4% quarter-on-quarter basis. Its NIM has gone up by 19bps to 3.1% as a result of continued asset re-pricing and higher yield on balances with the RBI. Fresh slippages moderated to Rs32bn/1.9% of loans, due to near-absence of corporate slippages that, coupled with higher recoveries/woffs, led to 47bps QoQ reduction in GNPA ratio to 5.9%.

Karur Vyasa Bank: Emkay Global Financial recommends a “buy” call with a target price of Rs 155

Based on the recent performance of Karur Vyasa Bank's healthy credit growth of 16% year-on-year and 4 % quarter-on-quarter basis largely driven by strong corporate & retail growth Emkay recommends this stock. "KVB remains one of our top picks in the small banking space, given
the expected improvement in its RoA/RoE to a decadal high of 1.4%/16%, healthy capital
ratios and emerging Management credibility." The banks higher asset re-pricing of its MCLR portfolio led to a 25-bps QoQ improvement in NIMs at 4.3%. Bank expects NIM to remain above 4%, given the changing loan composition and better asset-liability management. Fresh slippages were lower than expected at Rs1.6bn/1.2% of loans, which coupled with better recovery and accelerated write-offs, led to a sharp 1.3% reduction in GNPA ratio to 2.7%/NNPA to 0.9%

Disclaimer

The stocks have been picked from the brokerage report of Emkay Global Financial Services. 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 consult with certified experts before making any investment decision.