Three private-sector lenders from the Nifty Bank index gained over 100 percent, doubling investor wealth in the last 5 years. These include Kotak Bank, HDFC Bank, and IndusInd Bank. The Nifty Bank index has risen 88 percent in this duration as compared to a 45 percent gain in the Nifty50 index.
Kotak Mahindra Bank was the best performer, up 220 percent in the last 5 years. The stock rose from Rs 466 in July 2014 to Rs 1,494 currently. To put in perspective, an investment of Rs 1 lakh in July 2014 would have turned to Rs 3.2 lakh in just 5 years. The stock has gained over 19 percent in 2019 and 14 percent in the last 1 year. It hit its 52-week high of Rs 1,555.45 on May 23, 2019, and a 52-week low of Rs 1,002.3 on October 1, 2018.
For Q1, the lender's standalone profit for Q1 grew 32.7 percent year-on-year (YoY) to Rs 1,360.2 crore driven by lower provisions and higher net interest income. The profit in the corresponding quarter last fiscal stood at Rs 1,024.94 crore. Provisions and contingencies declined to Rs 316.76 crore from Rs 469.63 crore YoY.
However, talking about the outlook, Dipak Gupta, joint managing director at Kotak Mahindra Bank, warned that the small and medium enterprises segment continued to be a pain point. “We’ve been cautious about the slowdown for some six to nine months and will continue to remain cautious,” said Gupta, adding that the bank was seeing some stress in its unsecured loan book, but this was “not at alarming levels”.
Another bluechip banking stock, HDFC Bank, delivered 170 percent returns in the last 5 years. The stock jumped from Rs 836 in July 2014 to Rs 2,263 in July 2019. The stock added 7 percent in 2019 and 6 percent in the last 1 year.
However, the slowdown in demand had an effect on the bank in Q1. The bank reported weakness in asset quality and a slowdown in retail loan growth in the quarter despite a 20 percent increase in YoY net profit at Rs 5,568 crore.
Gross non-performing assets (NPA) of the private lender increased by 4 bps quarter-on-quarter and 7 bps year-on-year, mainly owning to seasonally higher slippages continued from the Agriculture segment, a Reliance Securities report noted.
The bank still remained a top pick in the sector for most of the brokerages. Jefferies retained buy call on HDFC Bank, stating that it's still one of the best-managed banks out there, while, Morgan Stanley was overweight on the stock.
IndusInd Bank is the third stock that doubled investor wealth in the last 5 years. The stock rose from Rs 555 in 2014 to Rs 1,416 in 2019, up 154 percent. The stock has, however, fallen 14 percent in 2019 and 30 percent in the last 1 year.
The decline in the stock price was a result of a 62 percent fall in its Q4 net profit, hurt by higher provisions for bad loans. Net profit fell to Rs 360 crore for the quarter as compared to Rs 953 crore a year ago.
For Q1, the bank is expected to report strong loan growth of 33 percent YoY in. Deposit growth is also estimated to remain strong at 28 percent YoY. "We expect non-interest income to grow 22 percent YoY, supported by healthy fee income growth. Treasury gains will further support non-interest income," MOSL said in a report.
Other gainers in the last 5 years from the Nifty Bank index included Axis Bank (up 79 percent), Federal Bank (up 52 percent), ICICI Bank (up 49 percent) and SBI (up 33 percent).
Among losers, Punjab National Bank, Bank of Baroda and YES Bank fell 17-63 percent.
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First Published: IST