Banking, Insurance stock picks: BFSI industry getting its mojo back; check top 4 shares to buy

Banking and financial services stocks have been gaining momentum for the last few weeks now. The Bank Nifty index has zoomed 4700 points in the last four weeks while the Nifty Financial Services index has jumped over 2,200 points in the same time period. Overhangs on the sector’s performance now seem to have reduced and with the preliminary recovery in economic indicators the outlook is now better than where it was a few months back. Brokerage and research firm ICICI Securities after having a conversation with management of leading financial institutions has given a ‘Buy’ call on these four financial stocks.

HDFC Ltd

ICICI Securities has given a ‘Buy’ call on HDFC Ltd stock, drawing from a conversation with HDFC executive management member Conrad D’Souza. Key takeaway from the conversation that was highlighted by ICICI Securities was that HDFC now believes that business is not only reverting to pre-Covid level, but entering the growth phase too. HDFC is receiving restructuring requests from customers but the number is low. In the month of September collection efficiencies were at 96%. HDFC sees commercial real estate coming back on its feet which is another positive for the firm. Currently the stock trades at Rs 2,248 per share.

ICICI Lombard General Insurance

The brokerage firm noted that the combination of low growth in motor premiums, higher Covid-19 claims, no hike in motor TP rates point to a business trough in the first half of the fiscal year. Going forward ICICI Lombard General Insurance should see a pickup in motor insurance and better earnings from the health segment. Bhargav Dasgupta, CEO ICICI Lombard and Gopal Balachandran, CFO, ICICI Lombard were hosted by ICICI Securities who expect improvement in motor OD rates from the next year and find the current rates unsustainable. Shares of the firm were trading at Rs 1,364 apiece on Monday.

Bandhan Bank

Bandhan Bank’s collection efficiencies have improved according to Chandra Shekhar Ghosh, MD, Bandhan Bank and Sunil Samdani, CFO. The improvement is in value as well as number of customers. The Bank sees financial year 2021 credit cost at 3.5%-3.6%. Bandhan Bank outperforms the industry when it comes to the SME space collections owing to a small ticket size. With addition of more experienced members to the management team, the bank looks poised towards maintaining its stellar performance. Bandhan Bank is also looking to grab the opportunity in the affordable housing segment, making it 20-25% of the total portfolio in the medium term. Bandhan Bank share price gained on Monday to trade at Rs 355 per share.

Piramal Enterprises

The firm has simplified the corporate structure with the Financial services now 100% owned by PEL. ICICI Securities hosted Hitesh Dhadda, Chief Investor Relations Officer of Piramal Enterprises who highlighted that, over the past six months, Piramal Enterprises has been conservatively focused on strengthening the balance sheet and ensuring adequate liquidity to navigate current cycle more effectively than others. Although large developers have done well in times of the pandemic, Piramal Enterprises plans to trim all large exposures to below 6-7% of net worth by March. Stocks were trading at Rs 1,432 per share.