CLSA sees 36-56% upside in shares of ICICI Bank, Axis and SBI

Mumbai: Foreign brokerage CLSA sees a 36-56% upside in shares of ICICI Bank, Axis Bank and State Bank of India (SBI) on attractive risk to reward for large-cap banks.

The brokerage said India’s financials have consolidated for the last two to three months after a post-Covid second wave pullback in April and May. CLSA has a target price of Rs 940 on ICICI Bank, implying a 36% upside from Wednesday’s closing price of Rs 690.90. On SBI, it has a price target of Rs 650, which is 56% above Wednesday’s closing price of Rs 416.20. Its price target of Rs 1,050 on Axis is 42% away from Wednesday’s closing price of Rs 738.90.

CLSA said its analysis of what’s priced in indicates that the current stock prices imply long-term return on equity of just 13-14% for ICICI Bank and Axis Bank and 9% for SBI.


CLSA said these figures are 2.8% lower for ICICI Bank and Axis Bank and more than 4% lower for SBI versus its long-term expectations on return on equity.

The brokerage said a mean reversion in asset quality is likely in the second half of the ongoing financial year.

The brokerage said ICICI Bank’s quality of earnings has improved materially in the last six to seven years and the bank is now also the new growth leader among large banks. CLSA expects ICICI Bank shares’ re-rating to continue. On Axis Bank, CLSA said normalising asset quality may be a catalyst for the stock in the second half of FY22.

The brokerage said SBI’s asset quality has held up well in the first and second wave of Covid-19 and a recent correction from the peak levels factors in asset quality risk from Vodafone Idea.