ICICI Bank, HDFC, IndusInd Bank: Goldilocks of an Uneven Recovery | Jefferies highlights
Jefferies remain positive on Financials and believe ICICI Bank (credit quality holding up & valuations reasonable), HDFC Ltd (best play on housing demand surge) and IndusInd Bank (business normalising after 2 years) offer the best risk-reward. Growth will likely be concentrated among stronger banks/NBFCs. Asset quality will be scrutinised vs guidance. Private bank profit may rise by 38% in FY22, from a low base. An uptick in fees and a rise in NII should drive operating profits in FY22. Coupled with a normalisation of credit costs, we expect a 38% YoY rise in FY22 for private banks' profit, albeit from a low base.
Economic activity has rebounded to near pre-Covid levels but is uneven. Jefferies thus expect govt and RBI support to continue: easy liquidity, low rates, and guaranteed loans: Reuters