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Nomura has said that it sees value in corporate banks such as ICICI Bank and Axis Bank. It added that they have underperformed the broader index and retail banks in the past 3-6 months.
“Many of the corporate banks we cover are trading in a value zone relative to their normalized ROEs (return on equity) and adjusted book multiples, hence we see value now in corporate banks,” the brokerage said in a note.
It said the stressed-asset recognition cycle is nearing its end although provisioning impact will continue into 2018/19 financial year
Nomura said that it preferred ICICI Bank and Axis Bank over state-run rivals as their ability to deliver growth beyond this credit cycle will be better.
It added that smaller state-run banks such as Union Bank of India and Bank of India will continue to have capital constraints.
Nomura has “buy” rating on ICICI, Axis, Bank of Baroda, State Bank of India and Punjab National Bank; “neutral” on Union Bank; “reduce" on Bank of India.
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