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BFSI Sector Outlook: Choose the Best Banking and Financial Stocks to Invest

Credit demand is strong in the banking sector and credit cost has been controlled. Asset quality is getting better. Growth is visible in bank deposits and advances.

Banking & Financial Stocks: The June quarter of the financial year 2023 can prove to be better for the banking and financial sector. Recently, the data released by banks for the June quarter looks strong. Brokerage houses and experts also say that after recovering from Kovid 19, now the business of banking and financial sector is coming back on track. Credit demand is strong and credit cast is under control. Asset quality is getting better. Growth is visible in bank deposits and advances. The results of private banks are expected to be more strong in the June quarter. The profits of banks can increase up to 40 percent on a yearly basis. In the coming days, better returns can be found in stocks like SBI, Axis bank, ICICI Bank, HDFC Bank, IndusInd Bank.

Brokerage House Motilal Oswal

Brokerage house Motilal Oswal Banking and Financial sector saw a 12.1 per cent jump in credit growth on a year-on-year basis till June 17, 2022. There is a strong showing in both the retail and SME segments. There is a revival in the corporate segment as well. Loan growth is expected to be 12%/13.5% YoY in FY23/FY24. Slippage is expected to remain under control. Asset quality is also expected to improve. The balance sheet of banks is going to be strong in the June quarter.

The brokerage house says that the PAT of the banking sector may increase by 26 per cent year-on-year in 1QFY23. On the other hand, private banks can show up to 40 percent growth in PAT on an annual basis. However, the PAT growth of PSU banks is estimated to be 6 percent. There may be a slight decline in PPOP.

The NII growth of private banks is estimated to be 18 percent on an overall year-on-year basis. While the NII growth of public sector banks is estimated to be 13.5 percent. Overall, the earnings growth of private and PSU banks can be 29 percent and 26 percent on an annual basis.

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(Source: Motilal Oswal)

Brokerage House ICICI Securities

According to brokerage house ICICI Securities, the focus of banks is on growth and the asset quality of banks is expected to remain better in Q1FY23E. Control is being seen on slippages and credit cast. After the increase in the repo rate, the banks have had to increase the retail deposit rate, the lending rate has also increased. The brokerage said a jump in government securities corporate bond yields and consequent pressure on treasury gains is expected to reduce the earnings of the sector.

Cast structure is expected to remain high, while advance growth may remain sustainable at 2-4 per cent QoQ on a quarterly basis. For Q1FY23, the brokerage estimates that the Net Interest Margin (NII) for banks can see a growth of 17 per cent year-on-year. Operating profit growth is expected to remain flat. On the other hand, earnings growth will be supported due to reduction in credit cost and lower base.

(Source: ICICI Securities)

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