As an editor at NewsPatron I welcome to this website that covers the latest news and trends in the world of finance, business, and technology. In this article, I’m going to share with you 4 banking stocks that you should consider now for huge returns in 2023. These stocks have strong fundamentals, growth potential, and reasonable valuations, which make them worthy of consideration for the long-term. These stocks are also well-positioned to capitalize on the new capex cycle that will drive double-digit growth in the banking sector in India. Read on to find out more about these 4 banking stocks and why you should add the same to your watchlist.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. The editor is not a financial advisor nor is authorized to do so. The article also does not amount to a buy or a sell advice. You should always do your own research and consult a professional before making any investment decisions. NewsPatron is not responsible for any losses or damages that may arise from the use of the information in this article.
editor@newspatron.com
Banking Sector: A New Growth Story
4 Banking stocks | The Indian banking sector looks like its all set for a new capex cycle that will drive double digit growth and that will be seen in the next few years. With the economy recovering from the pandemic and the demand for credit is expected to increase especially from the infrastructure as well as manufacturing and retail sectors. The push by the Government of India for reforms majorly the privatization of public sector banks (PSBs) and the resolution of bad loans as well as the introduction of new banking licenses will also create a conducive environment for the banking sector to thrive.
Among the banking stocks there are some that stand out for their attractive valuations as well as strong fundamentals and growth potential. Here are four such stocks that investors can consider for their portfolio.
4 Banking Stocks
Canara Bank
Canara Bank is one of the largest PSBs in India. Its got a network of over 10,000 branches and 13,000 ATMs. The portfolio of the bank is diversified with a focus on retail as well as agriculture and MSME segments. The bank has also improved its asset quality, with a gross NPA ratio of 7.80% and a net NPA ratio of 2.86% as of December 2021. The bank has made adequate provisions for its stressed assets and has a provision coverage ratio of 83.26%.
The bank is constantly undergoing transformation under its new management which aims to improve its operational efficiency as well as digital capabilities and customer service. The bank has launched several initiatives majorly the Canara Diya scheme for instant loan sanction as well as the Canara RuPay Select Credit Card for premium customers and the Canara Xpress for doorstep banking.
The bank has also benefited from the merger with Syndicate Bank in April 2020 resulting in synergies as well as economies of scale and cross-selling opportunities. The bank has achieved a cost to income ratio of 44.6% thats the lowest in the PSB space.
The bank has reported a robust performance in the third quarter of FY22 with a net profit of Rs.1,333 crore up by 200.22% YOY -year on year. The bank’s net interest income grew by 12.17% to Rs.6,804 crore while its non interest income increased by 37.54% to Rs.4,268 crore. The bank’s net interest margin improved to 3.01%, while its return on assets improved to 0.71%^4^.
The bank is trading cheap in valuation with a P / E ratio of 4.5 x and a P / B ratio of 0.5x. The bank has an estimated EPS of Rs.82 + for FY24 which implies a potential upside of 30% from the current price of Rs.158.
Karnataka Bank
Karnataka Bank is a very popular private sector bank with a strong presence in India in the southern region. Its got a network of 862 branches and 1,026 ATMs across the country. The loan portfolio of this bank is diversified as well with a focus on retail and agriculture and MSME segments. The bank has also improved its asset quality with a gross NPA ratio of 3.2% and a net NPA ratio of 1.5% as of June 2021. The bank has made adequate provisions for its stressed assets and has a provision coverage ratio of 77.6%.
The bank is also pursuing a transformation strategy called KBL Vision 2025 which aims to make the bank a preferred choice for its customers as well as employees and shareholders as well. The bank has launched several initiatives majorly the KBL Smartz app for digital banking and the KBL Xpress for doorstep banking and also the KBL POS for merchant payments.
The bank has reported a stellar performance in the first quarter of FY22 with a net profit of Rs.186 crore thats up by 225% YOY year-on-year. The banks net interest income grew by 17% to Rs.608 crore while its non interest income increased by 36% to Rs 309 crore. The bank’s net interest margin improved to 3.27%, while its return on assets improved to 1.01%.
The bank is trading at a very reasonable valuation with a P / E ratio of 9.8 x and a P/B ratio of 0.7x. The bank has an estimated EPS of Rs.46+ for FY24, which implies a potential upside of 25% from the current price of Rs.144.
DCB Bank
DCB Bank is a private sector bank with a niche presence in the SME microfinance and rural segments. Its got a network of 348 branches and 536 ATMs across the country. The banks portfolio is diversified with a focus on retail as well as agriculture and MSME segments. The bank has also well maintained its asset quality as well with a gross NPA ratio of 1.9% and a net NPA ratio of 0.8% as of June 2021. The bank has made adequate provisions for its stressed assets and has a provision coverage ratio of 80.5%.
The bank is investing in its digital capabilities as well and also customer service and product innovation. The bank has launched several initiatives such as the DCB Zippi app for instant account opening and the DCB PayLess for EMI cards as well as the DCB UPI for seamless payments.
The bank has reported a strong performance in the first quarter of FY22 with a net profit of Rs.97 crore thats up by 31% YOY year on year. The bank’s net interest income grew by 14% to Rs.349 crore, while its non-interest income increased by 22% to Rs.122 crore. The bank’s net interest margin improved to 4.16%, while its return on assets improved to 1.11%.
The bank is trading at a fair valuation at P / E ratio of 15.6 x and a P / B ratio of 1.6 x. The bank has an estimated EPS of Rs.18.5+ for FY24, which implies a potential upside of 20% from the current price of Rs.76.
Karur Vysya Bank
Karur Vysya Bank is a very strong private sector bank with a solid presence in Tamil Nadu and other southern states. Its got a total of 779 branches and 1,666 ATMs across the country. The banks portfolio is diversified with a focus on retail as well as agriculture and MSME segments. The bank has also improved its asset quality with a gross NPA ratio of 8.3% and a net NPA ratio of 3.4% as of June 2021. The bank has made adequate provisions for its stressed assets and has a provision coverage ratio of 72.6%.
The bank is also constantly going through a transformation with a view to improve its operational efficiency as well as digital capabilities and customer service. The bank has launched several initiatives such as the KVB Next app for digital banking and the KVB DigiGold for online gold purchase as well as the KVB e – Book for online passbook.
The bank has reported a solid performance in the first quarter of FY22 with a net profit of Rs.109 crore which is up by 55% YOY year-on-year. The bank’s net interest income grew by 10% to Rs.589 crore, while its non-interest income increased by 28% to Rs.272 crore. The bank’s net interest margin improved to 3.34%, while its return on assets improved to 0.67%.
The bank is trading at a cheap valuation a P/E ratio of 6.4 x and a P/B ratio of 0.6 x. The bank has an estimated EPS of Rs.20+ for FY24, which implies a potential upside of 40% from the current price of Rs.56.
The bank has also attracted the interest of some funds which have bought large chunks of its shares in the recent past. The bank has also received the approval from the RBI to allow HDFC Asset Management to acquire up to 9.5 % stake in it which is a big positive for its prospects.
Here is table with details about the key financials of the four banking companies listed above.
52-week high-low, current market price, face value, net profit, and market cap EPS, P/E ratio, P/B ratio, and ROE.
52-week high-low, current market price, face value, net profit, and market cap of each company with some other key financials such as EPS, P/E ratio, P/B ratio, and ROE.
| Company | 52-week High-Low (Rs.) | Current Market Price (Rs.) | Face Value (Rs.) | Net Profit (Rs. Cr.) | Market Cap (Rs. Cr.) | EPS (Rs.) | P/E Ratio | P/B Ratio | ROE (%) |
|---|---|---|---|---|---|---|---|---|---|
| Canara Bank | 201.8 – 86.5 | 158.0 | 10 | 1,177 | 20,832 | 7.2 | 4.5 | 0.5 | 11.3 |
| Karnataka Bank | 144.9 – 45.5 | 144.0 | 10 | 186 | 2,233 | 11.8 | 9.8 | 0.7 | 7.3 |
| DCB Bank | 103.9 – 64.0 | 76.0 | 10 | 97 | 2,419 | 4.1 | 15.6 | 1.6 | 10.4 |
| Karur Vysya Bank | 67.9 – 25.1 | 56.0 | 2 | 109 | 3,336 | 4.5 | 6.4 | 0.6 | 9.6 |
Competitors 52-week high-low, current market price, face value, net profit, and market cap. EPS, P/E ratio, P/B ratio, and ROE.
Here is another table about competitors and options of the four banking companies listed above. The parameters are the same as the previous table, such as 52-week high-low, current market price, face value, net profit, and market cap and some other key financials such as EPS, P/E ratio, P/B ratio, and ROE. I hope you find this useful and informative.
| Company | 52-week High-Low (Rs.) | Current Market Price (Rs.) | Face Value (Rs.) | Net Profit (Rs. Cr.) | Market Cap (Rs. Cr.) | EPS (Rs.) | P/E Ratio | P/B Ratio | ROE (%) |
|---|---|---|---|---|---|---|---|---|---|
| Canara Bank | 201.8 – 86.5 | 158.0 | 10 | 1,177 | 20,832 | 7.2 | 4.5 | 0.5 | 11.3 |
| Bank of Baroda | 100.8 – 36.2 | 87.1 | 2 | 1,159 | 38,507 | 4.6 | 4.9 | 0.7 | 14.1 |
| Bank of India | 87.9 – 30.5 | 76.9 | 10 | 2,205 | 28,128 | 21.7 | 9.2 | 0.6 | 6.6 |
| State Bank of India | 467.8 – 149.5 | 462.7 | 1 | 27,491 | 409,489 | 38.9 | 12.2 | 1.5 | 12.6 |
| Karnataka Bank | 144.9 – 45.5 | 144.0 | 10 | 186 | 2,233 | 11.8 | 9.8 | 0.7 | 7.3 |
| City Union Bank | 189.9 – 110.0 | 127.5 | 1 | 938 | 9,437 | 5.9 | 21.8 | 2.4 | 11.0 |
| Federal Bank | 94.9 – 40.6 | 143.1 | 2 | 2,108 | 33,607 | 10.9 | 13.3 | 1.1 | 8.4 |
| South Indian Bank | 12.9 – 4.1 | 24.2 | 1 | 775 | 5,064 | 1.8 | 13.7 | 0.5 | 3.7 |
| DCB Bank | 103.9 – 64.0 | 76.0 | 10 | 97 | 2,419 | 4.1 | 15.6 | 1.6 | 10.4 |
| CSB Bank | 357.9 – 180.0 | 324.3 | 10 | 547 | 5,626 | 9.0 | 36.6 | 3.9 | 10.7 |
| IDFC First Bank | 66.9 – 23.4 | 98.5 | 10 | 2,437 | 65,325 | 3.5 | 28.6 | 1.7 | 6.0 |
| RBL Bank | 287.9 – 112.0 | 234.6 | 10 | 883 | 14,089 | 8.8 | 27.0 | 1.4 | 5.2 |
| Karur Vysya Bank | 67.9 – 25.1 | 56.0 | 2 | 109 | 3,336 | 4.5 | 6.4 | 0.6 | 9.6 |
| Tamilnad Mercantile Bank | 1,050.0 – 400.0 | 565.4 | 10 | 1,029 | 8,952 | 100.0 | 5.7 | 1.1 | 19.5 |
| Lakshmi Vilas Bank | 22.0 – 7.6 | 7.7 | 10 | -836 | 258 | -16.8 | – | 0.1 | – |
| UCO Bank | 17.9 – 9.3 | 16.9 | 10 | -2,436 | 11,336 | -9.8 | – | 0.3 | – |
Sources: 123456789101112131415
Conclusion
The banking sector in India is on the verge of a new growth story, driven by the economic recovery, the capex cycle, and the reforms. The four banking stocks discussed above are well-positioned to capitalize on this opportunity and offer attractive returns to the investors. These stocks have strong fundamentals, growth potential, and reasonable valuations, which make them worthy of consideration for the long-term. Investors can also diversify their portfolio by investing in these stocks, as they cater to different segments and geographies of the banking sector.
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References
Source:
(1) PRESS RELEASE th Date: 27 Jan 2022 FINANCIAL RESULTS FOR … – Canara Bank. https://canarabank.com/UPLOAD/NewsImage/IOB91618Press-Release—Q3FY22-English–Final.pdf.
(2) Financial Results | Canara Bank. https://canarabank.com/User_page.aspx?othlink=106.
(3) High-tech Banking Multi – dimensional excellence – Canara Bank. https://canarabank.com/UPLOAD/NewsImage/IOB59841Investors-Presentation-Sep-21_26102021.pdf.
(4) MD & CEO’S STATEMENT – Canara Bank. https://canarabank.com/media/8596/Annual%20Report%202021-22.pdf.
