Indian stock markets have witnessed a splendid journey so far in 2017 after a major plunge was observed post demonetisation in November 2016. Key equity indices Sensex and Nifty have returned in a range of 22-24% while the banking sector indices have grown about 30% so far from January 2017. The Nifty Bank had risen 32% to 24,009.75 points and Nifty Pvt Bank index has jumped 35% to 13,557.4 points. Meanwhile, Nifty PSU Bank has lost 1.32% to 2,942.7 points in the corresponding period. As far as the returns are concerned the private bank stocks have been much promising as compared to their PSU peers. We bring you five private bank stocks which may return up to 35%.
RBL Bank — Aditya Birla Money
Shares of RBL Bank have risen about 50% in the current calendar year so far. The research and brokerage firm Aditya Birla Money has given a further upside of up to 20% from its current market price of Rs 517. “RBL Bank has delivered a PAT CAGR of 70%+ over past five years with ROE of 10%+. As far as valuation is concerned, it is valued at 22x FY19E P/E and 3x FY19E P/B. Given the loan book growth with controlled asset quality, RBL Bank is well placed to improve its ROA and improve its profitability further. We expect the stock to deliver 20%+ returns over the next 12 months,” according to Aditya Birla Money.
Federal Bank — Globe Capital Market
Shares of Federal Bank have returned more than 80% in 2017 so far. The research and brokerage firm Globe Capital Market has further given an upside of 25% from its current market price of Rs 117 to a target price of Rs 147. “The company’s management expects the year on year loan book growth for the bank to be upward of 20-25% and sequential growth of 5 % as corporate growth continues to gain momentum,” according to Globe Capital Market.
South Indian Bank — Indiabulls Ventures
Shares of South Indian Bank has returned over 50% since January 2017. The research and brokerage firm Kotak Securities has recommended it to buy on Diwali with an upside of 33% from its current market price of Rs 30 to the target price of Rs 40. “The asset quality of South Indian Bank has been improving consistently over a period of four quarters. It’s net NPAs (non-performing assets) declined by 144 bps to 1.45% in first quarter of the financial year 2018 as compared to 2.89% in the same period last year. We feel management is taking conscious efforts in further bringing down it’s asset quality which will lead to lesser provisions and in-turn lead to an increase in the profitability,” according to Indiabulls Ventures.
IndusInd Bank — ShareKhan
Shares of IndusInd Bank have returned about 50% since January this year. IndusInd Bank has been among the best‐performing private sector banks with its superior operating metrics. Despite the banking sector facing tough times on asset quality owing to various reasons, IndusInd Bank’s asset quality has been excellent. Gross non‐performing asset (NPA) ratio of IndusInd stands at 0.93% as of March 2017 which is among the best in the industry, according to Sharekhan.
Karur Vysya Bank — Angel Broking
Shares of Karur Vysya Bank have returned over 50% in 2017 so far. The research and brokerage firm Angel Broking has given a target price of Rs 180 implying an upside of 26% from its current market price of Rs 143. “KVB had a fairly strong loan CAGR of 14.9% over FY11-17. However, FY17 was a year of consolidation and loan book grew by only 4.7%. We expect loan growth to pick up to 11% over FY17-19. Deposit growth is expected at 9% during the period,” according to Angel Broking.