Morgan Stanley is super hyped about AU Small Finance Bank shares, expecting them to shoot up by a whopping 41% in the next year. They’re all like, ‘This bank is gonna crush it!’ The brokerage folks at Morgan Stanley are totally backing this bank, giving it an ‘overweight’ rating and jacking up the target price from ₹925 per share to ₹1,000 per share. That’s a potential upside of 41%, up from 31% earlier. They’re saying this bank is at a turning point and is set to more than double its earnings per share (EPS) over the FY23-36 period.
And get this, while other Indian banks are expected to see a decline in net interest margins (NIMs), AU Small Finance Bank is expected to improve its margins over the next few years. How? By going all out on growth and riding the wave of the rate cycle. The brokerage is all about that strong growth and peaking of the rate cycle, you know?
But wait, there’s a catch. The credit cost of the bank hasn’t gone back to normal yet, but that’s not gonna stop it from achieving 25%-30% EPS growth. The brokerage is like, ‘Yeah, the valuations have taken a hit, but we’re still bullish on this bank.’
Oh, and here’s the kicker. The brokerage is also betting big on the potential merger of AU Small Finance Bank with Fincare SFB. They’re saying, ‘If this merger goes down smoothly, we’re looking at more than 5% upside for FY26 EPS.’
Fincare Small Finance Bank, a digital-first small finance bank, is all set to merge into AU Small Finance Bank through an RBI-administered scheme of amalgamation. Shareholders of Fincare SFB will get 579 shares in AU SFB for every 2,000 shares held in Fincare SFB. After the merger, existing shareholders of Fincare SFB will hold 9.9% in AU SFB.
As of Monday, November 13, AU Small Finance Bank shares were trading 2.61% higher at ₹726.45 apiece. Looks like things are heating up for this bank!
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