Axis Bank best pick in private banking space: ICICIdirect

According to ICICIdirect.com, Axis Bank remains best pick in the private banking space. One can also look at HDFC Bank & DCB Bank post the recent correction. Pain seems largely priced in and risk reward is turning favourable, however uncertain quarter ahead to keep near term upside capped", says the report.

"In the past three months, gains in Bank Nifty have been muted at 3.5% vs. the Nifty rising by 6.3%. The laggards have been PSU banks. Large PSU banks, on an average, have clocked negative returns of 16.5% in the past three months while large private banks gave positive returns of ~11.6%. Weak Q3FY15 earnings, primarily, owing to higher-than-expected asset quality deterioration leading to higher credit cost & interest reversals led investors to stay away from PSU banks. In contrast, private banks were able to maintain a healthy earnings performance on the back of steady business growth, healthy margins and manageable asset quality."

"Investor comfort would continue with private banks despite their trading at rich valuations. However, our per branch analysis suggest that at CMP, upsides in IndusInd to be limited but can be considered on dips. We have raised our target price for Yes Bank to Rs 950 with multiple rising to 2.3x FY17E ABV. Yes Bank would be a significant beneficiary of declining interest rates and increase in FII holding limits. Axis Bank remains our best pick in the private banking space. One can also look at HDFC Bank & DCB Bank post the recent correction. Pain seems largely priced in and risk reward is turning favourable, however uncertain quarter ahead to keep near term upside capped", says ICICIdirect.com research report.

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