IndusInd Bank’s shares have received another downgrade, however, Goldman Sachs is advising investors to consider purchasing these banking stocks
IndusInd Bank: The global brokerage firm Goldman Sachs has updated its perspective on banks, shifting from a Goldilocks period to a muddle-through scenario, anticipating further cuts in earnings per share.
The foreign brokerage recommends a selective approach, downgrading IndusInd Bank to Neutral and lowering its target price to ₹1,090. This target implies a potential upside of 11% from the stock’s closing levels on Thursday.
Goldman Sachs identifies several trends affecting the sector, including:
1) Consolidation of credit growth, particularly in consumer retail for households due to increased leverage,
2) Higher credit costs as various loan segments experience a credit downcycle,
3) Weaker PPOP-ROA driven by subdued net interest margins (NIMs) and rising operational expenses.
The brokerage firm has adjusted its earnings per share estimates, reducing them by 1.5% for FY25, 4.8% for FY26, and 5.6% for FY27.
Goldman Sachs shows a preference for HDFC Bank, followed by Kotak Mahindra Bank, AU Small Finance Bank, Cholamandalam Investment and Finance Company, SBI Card, Shriram Finance, and Aavas Financier.
In a recent report, another brokerage house, Jefferies, anticipates that private banks with strong deposit growth will outperform, while HDFC Bank and PSU banks may experience slower growth.
Among private banks, ICICI Bank, Axis Bank, and HDFC Bank are highlighted as top picks, with Kotak Mahindra Bank being upgraded from Hold to Buy due to improved valuations.
On the public sector side, SBI remains the preferred choice. However, Bank of Baroda has been downgraded from Buy to Hold due to its high loan-to-deposit ratio and slower deposit growth, which could limit its performance and rerating potential, according to the brokerage.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.