CLSA sees a lot of value in large cap banks

Published On: Tuesday, March 16, 2021 | By: Team KnowMyStock

CLSA sees a lot of value in large-cap banks like Axis Bank, State Bank of India, and ICICI Bank, in spite of the 60-90% surge in their stocks since September 2020. "We see a dual benign credit cycle play out both for corporate and retail loans from FY22, and our top picks are key beneficiaries as 70% of their provisioning in the past five years was due to high corporate stress," said CLSA. The brokerage said the dual benign credit cycle for both corporate and retail loans continues to play out and the reversing rate cycle is positive for banks' net interest margins. CLSA said its analysis on what's priced in indicates that the current share prices imply long term return on equity of 13.5-14% for ICICI Bank and Axis bank and 10% for SBI. This is 2.5% lower for Axis Bank and ICICI Bank and 3% lower for SBI versus its long-term return on equity expectations.

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