Stock To Buy: Large Cap Banking Stock Figures In Buy List Of Sharekhan After Sustained Performance

Sharekhan has recommended large cap banking stock, Axis Bank for investment after it reported strong performance on a sustained basis. According to Sharekhan, "Axis Bank is now emerging as structurally a stronger franchise, which will continue to deliver consistent performance." If you buy Axis Bank shares now, it is set to give you a potential 20% return. Check key takeaways below:

1. Axis Bank Stock Performance & Return

The last trading price of the stock is Rs 946 apiece with an intraday gain of 1.18%. The stock's 52-week high is Rs 950 apiece and 52-week low is Rs 618 apiece, respectively. It has a market capitalisation of Rs 2,90,867.40 crore.

It has given 70% return in last 5-years, 27% in last 3-years, and 37% in last 1-year. The stock has rallied 19% in last 3-months and 10% in last 1-month.

2. Structural Improvement Visible In The Franchise

The bank's focus on growing its asset franchise in a granular manner should lead to sustainable growth in PPoP. Share of retail loans has increased from 45% in FY2017 to 55% in H1FY2023.

Retail, SME, and mid-corporate loans remain key focused segments and these segments are growing at a healthy pace in a granular manner. The bank has started gaining market share on CASA front, aided by leveraging digital ecosystem, focusing on corporate salary account acquisition, and cross-sell liability products to existing clients.

3. NIM To Improve Further

According to Sharekhan, "We expect further improvement in NIM (Net Interest Margin) over the medium term, which will be driven by - a. Loan growth skewed towards the higher yield segment (i.e., unsecured); currently unsecured loans stand at 9% of the total book vs. peers at ICICI Bank at ~12% b. Improvement in low-cost granular deposit base.

Going forward, we believe benefits from repricing of the book, which is still left, would get offset by increased cost of deposits as frontline banks have already started to raise rates of retail deposits across maturities."

4. Valuation & Key Risk

According to Sharekhan, "We believe its valuations are reasonable, given structural improvement in the franchise. The bank is taking a more sustainable path for growth on both assets as well as liability side. New digital products offering, both in assets and liability segments, are growing well, as reflected in strong growth in customer acquisition. It is well positioned for closing the valuation gap with peers as it reports strong performance on a sustained basis and as Citi's acquisition is consummated successfully going forward."

Key Risks: Economic slowdown due to which slower loan growth and higher-than-anticipated credit cost and lower-than-expected margin expansion.

5. About Axis Bank

Axis Bank is the third-largest private sector bank in India. The bank offers the entire spectrum of financial services to customer segments, covering large and mid-corporates, MSME, agriculture, and retail businesses. The bank has 11 subsidiaries, which contribute and benefit from the bank's strong market position across categories

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. 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.