SBI MF's top banking picks rallied up to 18% in 2021; are you late to the party?

SBI Mutual Fund, India’s biggest mutual fund house by assets, bought over 20 lakh shares each in ICICI Bank, HDFC Bank and Axis Bank in January when the benchmark BSE Sensex declined 3%.

A growth-oriented budget and the proposed setting up of an asset reconstruction company and an asset management company (AMC) to clean up non-performing assets have been the major factors behind the momentum in the banking space.

On a Year-To-Date (YTD) basis, shares of ICICI Bank jumped 18% to Rs 632.40 till date. Axis Bank also advanced 18% to Rs 734, while HDFC Bank gained 10% to Rs 1,583 during the same period. On the other hand, BSE Bankex has gained over 13% YTD.

Is there more steam left in these counters after the recent run?

Edelweiss Securities is bullish on ICICI Bank with a price target of Rs 700, indicating an upside of nearly 11% from the current market price.

“ICICI Bank posted better-than-expected results for Q3FY21 (in terms of profitability and credit growth). Domestic credit/overall credit grew 13%/10% YoY, which led to 16% YoY growth in net interest income,” the brokerage said.

ICICI Bank on January 30 reported a 17.73% jump in its December quarter consolidated net profit to Rs 5,498.15 crore, helped by a jump in core income but experienced a surge in bad assets from its retail loans.

Edelweiss Securities also has “Buy’ call on Axis Bank with a price target of Rs 775.

“Axis Bank’s Q3FY21 results were below expectations on the profitability front due to elevated overall costs. The bank continues to create higher provisioning buffer, maintaining excess liquidity and comfortable overall capital position. We believe the bank’s ample buffer provisions, comfortable capital adequacy, and excess liquidity should aid market share gains in the future,” the brokerage said in a report.

Private sector lender Axis Bank last month reported a 36.4% decline in standalone net profit to Rs 1,116.60 crore for the third quarter ended December 2020. It had posted a profit of Rs 1,757 crore in the corresponding period of the previous fiscal.

SBI Mutual Fund held 25 crore, 16 crore and 10 crore shares of ICICI Bank, HDFC Bank and Axis Bank, respectively, as of January 31.

ICICI Securities has a ‘Buy’ rating on HDFC Bank with a price target of Rs 1,700. “Digital initiatives and increasing economic activity are seen as propelling retail credit growth ahead. This, coupled with healthy traction in corporate
disbursement to keep business momentum ahead of the industry,” the brokerage said.

The country’s largest private sector lender HDFC Bank recently reported a 14.36% jump in consolidated net profit to Rs 8,760 crore for the December quarter, driven by a surge in core income. At the standalone level, net profit for the three-month period grew 18.09% to Rs 8,758.29 crore, on the back of a 15.1% growth in the core net interest income at Rs 16,317 crore. Its deposits grew 19.1% and the share of low-cost current and savings account deposits was 43%.