3 hrs ago
MOFSL Sets Bank Share Targets Amid Credit Growth Optimism
MOFSL is a brokerage that studies banks and their possible share prices.
It believes bank lending could grow faster in the future.
It expects some pressure on banks’ interest margins in the short term.
This is partly because banks may earn smaller spreads on certain foreign-currency deposits.
MOFSL still thinks these deposits can help banks grow their balance sheets.
It named ICICI Bank, State Bank of India, Kotak Mahindra Bank and AU Small Finance Bank as preferred ideas.
It also gave possible share-price targets for six other banks.
Foreign-money inflows have created more than Rs 6 lakh crore of extra liquidity in the banking system.
Several banks have also raised billions of dollars through overseas bonds.
MOFSL expects domestic banks’ net interest margins to face near-term pressure from limited spreads on overseas leveraged FCNR(B) deposits.
The brokerage raised its system credit-growth projection to 14.3% year-on-year and sees potential growth of 15.5%-16% in FY27E.
MOFSL’s preferred banking ideas are ICICI Bank, State Bank of India, Kotak Mahindra Bank and AU Small Finance Bank.
The brokerage assigned targets of Rs 925 for HDFC Bank, Rs 1,500 for Axis Bank, Rs 225 for Bandhan Bank, Rs 1,125 for IndusInd Bank, Rs 135 for Punjab National Bank and Rs 400 for Federal Bank.
Net banking-system liquidity exceeded Rs 6 lakh crore on August 31, while banks raised $12.2 billion through dollar-denominated bonds after changes to overseas borrowing hedging costs.
- Who
- MOFSL and the banks discussed in its report, including HDFC Bank, ICICI Bank, State Bank of India, Axis Bank, Bandhan Bank, IndusInd Bank, Punjab National Bank, Federal Bank, Kotak Mahindra Bank and AU Small Finance Bank.
- What
- MOFSL issued bank share-price targets and updated its views on credit growth, liquidity, FCNR(B) deposits and overseas borrowing.
- Where
- The developments concern India’s banking system and banks’ overseas funding activities.
- When
- The report cites data as of August 31 and gives estimates for FY27E.
- Why
- MOFSL expects deposit deployment, improving asset quality and stronger credit growth to support bank earnings despite near-term net interest margin pressure.
Key facts
- Brokerage
- MOFSL, or Motilal Oswal Financial Services
- System credit-growth estimate
- 14.3% year-on-year
- FY27E credit-growth range
- 15.5%-16%, according to MOFSL
- System liquidity
- More than Rs 6 lakh crore as of August 31
- Deposit growth
- 14.7% year-on-year in the recent fortnightly data
- Dollar-denominated bonds raised
- $12.2 billion after relaxed hedging costs for overseas foreign-currency borrowings
- Highest stated share target
- Axis Bank: Rs 1,500
- FCNR(B) mobilization leader cited
- ICICI Bank mobilized $17.9 billion and held a 14% share of total FCNR(B) inflows
Quotes
MOFSL
Domestic brokerage providing banking-sector analysis and stock recommendations
“We remain positive about systemic credit growth and have recently increased our growth projections to 14.3 per cent YoY, acknowledging that there is an upside risk to our estimates. We estimate a 150 bps increase in system credit growth to 15.5-16 per cent for FY27E. Top ideas: ICICI Bank, SBI, Kotak Mahindra Bank and AU SFB”
businesstoday.in
“While all these deposits might not be under the swap facility given that total OFCB garnered under the scheme is Rs 530 crore, much of these overseas borrowings shall be utilized in providing the leverage facility for FCNR (B) deposits”
businesstoday.in
Sources
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