2 hrs ago
Nuvama Names Banking and NBFC Picks, Sets Target Prices
Nuvama is a brokerage that shared which bank and finance-company stocks it likes.
It gave five banks a ‘Buy’ rating and published a target price for each.
It said some banks may face lower profit margins for a short time because of how they get funding.
Nuvama expects most of that pressure to ease in two to three quarters.
It also said new managing directors at Kotak Mahindra Bank and HDFC Bank remove an important uncertainty.
For finance companies, it expects good lending and earnings growth in Q2 FY27.
But it warned that higher rates and limits on insurance commissions could create earnings risks for two companies in FY28.
It named four NBFCs as its preferred picks.
Nuvama expects FCNR-B deposit funding to pressure banks’ margins in the near term, with most of the effect reversing over two to three quarters.
It said MD appointments at Kotak Mahindra Bank and HDFC Bank remove a key overhang and could support gradual re-rating of large private banks.
Nuvama rated Kotak Mahindra Bank, ICICI Bank, RBL Bank, Karur Vysya Bank and Ujjivan Small Finance Bank ‘Buy’.
Its preferred NBFC picks are Piramal Finance, Shriram Finance, Aditya Birla Capital and CreditAccess Grameen, all rated ‘Buy’.
Nuvama expects healthy NBFC credit and earnings growth in Q2 FY27, but flagged FY28 earnings risks for Mahindra & Mahindra Financial Services and L&T Finance.
- Who
- Nuvama, a brokerage, issued its stock views and target prices.
- What
- It shared preferred bank and NBFC stocks, ratings, target prices, and outlooks.
- Where
- The companies discussed are in India; no specific location was stated.
- When
- The outlook covers the near term, Q2 FY27, and FY28; target prices are for 12 months.
- Why
- Nuvama cited expected margin trends, management appointments, credit and earnings growth, and possible earnings risks.
Near-term pressure and risks
Expected growth and easing pressures
Bank funding costs and margins
Near-term pressure and risks
FCNR-B deposit funding could weigh on banks’ margins in the near term.
Expected growth and easing pressures
Nuvama expects the impact to largely reverse over the next two to three quarters.
NBFC earnings outlook
Near-term pressure and risks
Rate hikes and capped insurance commissions could create FY28 earnings risks for Mahindra & Mahindra Financial Services and L&T Finance.
Expected growth and easing pressures
Nuvama expects healthy NBFC credit and earnings growth in Q2 FY27, supported by operating leverage and benign credit costs.
Key facts
- Kotak Mahindra Bank
- Buy; 12-month target price Rs 550
- ICICI Bank
- Buy; target price Rs 1,850
- RBL Bank
- Buy; target price Rs 470
- Karur Vysya Bank
- Buy; target price Rs 360
- Ujjivan Small Finance Bank
- Buy; target price Rs 90
- Preferred NBFCs
- Piramal Finance (Rs 2,600), Shriram Finance (Rs 1,250), Aditya Birla Capital (Rs 480), and CreditAccess Grameen (Rs 1,700); all rated Buy
- NBFC outlook and risks
- Healthy credit and earnings growth expected in Q2 FY27; rate hikes and capped insurance commissions may pose FY28 earnings risks for Mahindra & Mahindra Financial Services and L&T Finance
Sources
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