The June-quarter earnings season has prompted ICICI Securities to revise its outlook on several private sector banks, with Kotak Mahindra Bank and RBL Bank emerging as its preferred picks, offering the highest potential upside among the stocks under its coverage.
Leading the list is Kotak Mahindra Bank, where ICICI Securities has maintained its 'Buy' rating with a target price of Rs 480, implying an upside of around 23% from the current market price. The brokerage believes concerns around the bank's MD & CEO succession are already reflected in the valuation, while improving asset quality, healthy loan growth and the potential revival in unsecured retail lending could support earnings over the next two years.
The second-highest upside is seen in RBL Bank, where ICICI Securities retained its 'Buy' recommendation and raised the target price to Rs 430 from Rs 390, implying a potential 17% gain. While the brokerage acknowledged that the bank's June-quarter performance was impacted by weaker net interest margins, elevated credit card stress and subdued profitability, it believes these headwinds have likely bottomed out. A stronger capital position following the Emirates NBD investment, improving funding profile and an expected recovery in margins underpin its positive stance.
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For Federal Bank, however, the brokerage struck a more cautious tone. Despite describing the lender's June-quarter performance as strong—with healthy loan growth, expanding net interest margins and improving asset quality—it downgraded the stock to 'Hold' from 'Add', citing limited upside after the recent rally. The target price was raised to Rs 360, implying only about 3% upside.
ICICI Securities is even more restrained on Yes Bank and South Indian Bank. It maintained 'Hold' ratings on both stocks with target prices of Rs 24 and Rs 45, respectively, indicating little upside from current levels despite operational improvements. For Yes Bank, the brokerage highlighted improving loan growth and stable margins but noted that return on assets remains below 1%. In South Indian Bank's case, strong margin expansion and better asset quality were offset by weak treasury and fee income.
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