Bank shares dazzle; ICICI m-cap hits Rs 8 trn; SBI, Indian Bk soar up to 5%

Bank Nifty hit a new all-time high on Monday led by a rally in ICICI Bank post inline Q4 results. Analysts upbeat on future prospects of the private sector bank.

Stocks of listed banks were in demand, on the stock exchanges, with the Nifty Bank index hitting a new high of 49,320.85 after a strong rally in private and public sector banks amid healthy Q4 results. The banking index surpassed its previous high of 49,057.40 touched on April 10.

Stock prices of ICICI Bank, State Bank of India (SBI), Indian Bank, Yes Bank, AU Small Finance Bank, IDBI Bank, Union Bank of India, Bank of India, Uco Bank and Bank of Maharashtra rallied between 3 per cent and 5 per cent. Share prices of Axis Bank, IndusInd Bank, Kotak Mahindra Bank and HDFC Bank were up in the range of 1 per cent to 2.6 per cent.

At 01:44 pm; Nifty Bank index, the top gainer among sectoral indices, was up 2.3 per cent, as compared to 0.90 per cent rise in the Nifty 50. Nifty PSU Bank and Nifty Private Bank index were up 2.5 per cent and 1.9 per cent, respectively.

Among individual banks, ICICI Bank stock hit a new high at Rs 1,160.50, as they surged 5 per cent after analysts raised target price and earnings per share (EPS) forecast on the stock post inline results for the quarter ended March 2024 (Q4FY24).  In the process, ICICI Bank's market capitalisation (m-cap) touched Rs 8 trillion market cap for the first time today. Currently, the bank’s m-cap stood at Rs 8.14 trillion, the BSE data shows.

With merger-related uncertainties for HDFC Bank and recent embargo on Kotak, ICICI Bank is a clean play on best-in class-RoA. ICICI Bank's RoRWA has drastically improved and offers a strong earnings compounder (let alone valuation re-rating). ICICI Bank should trade at a premium on high-quality earnings, according to analysts at Elara Capital.

However, though HDFC Bank has been struggling in respect of deposit growth and a weak LCR, any probable deposit rate hike adopted by HDFC Bank needs to be followed by ICICI Bank to manage their market share. Also, on the yield front, HDFC Bank has superior access compared to ICICI Bank on unsecured retail & SME/MSME fronts amid a wider branch network and improved rural/semi-urban reach. Thus, both the banks are similarly placed on the margin front, analysts at Incred Research Services said.

The brokerage firm also expects improving operating leverage to play a key trigger for HDFC Bank with a rise in the size of large-ticket mortgage loans, which attracts lower operating expenses. Thus, assuming a similar asset quality profile, HDFC Bank is better placed than ICICI Bank on the growth (due to improved reach) & profitability (improved operating leverage) fronts, analysts said in ICICI Bank result update.

Shares of Yes Bank surged 9 per cent to Rs 28.50 amid heavy volumes after the bank’s profit jumped over 123 per cent to Rs 452 crore in Q4FY24, against Rs 202.43 crore in Q4FY23. In terms of asset quality, the gross non-performing assets (NPA) ratio reduced to 1.7 per cent in Q4FY24, from 2.2 per cent in Q4FY23. The net NPA ratio improved marginally to 0.6 per cent in Q4FY24.