Global Analysts See Turnaround In Store For HDFC Bank, ICICI Bank And Other Private Lenders

Global analysts are turning bullish on India’s private banking stocks, which recently began outperforming the wider market after muted returns for the early part of the year.

What Happened: BofA Securities has issued a “buy” rating on the top four private banks, HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank, expecting robust earnings momentum and appealing valuations.

The brokerage expects these leading private banks to beat market returns in the June quarter as strong earnings are projected to bolster net interest margins and sustain robust credit flow, ensuring a stable outlook.

“The current risk-reward scenario favors large-cap private banks in the near term. The recent rise in HDFC Bank’s stock is due to stabilized expectations and positioning. Additionally, there’s increasing confidence in the FY25 earnings per share (EPS) for ICICI Bank, Axis Bank, and Kotak Mahindra Bank,” BofA Securities stated. The research firm perceive a balanced risk-reward situation for mid-sized banks.

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PSU Banks To Shine Later: While the brokerage is positive on public sector banks as well, it anticipates that EPS upgrades for public lenders will resume only from Q2FY25 onwards.

Earlier, global rating agency Moody’s also released a favourable note, estimating Indian banks to register 12-14% credit growth over the next 12-15 months as demand continues to revive.

“Banks are well-positioned to seize opportunities from the country's strong economic prospects through lending growth in sectors such as infrastructure, energy transition, manufacturing, small businesses, and retail,” Moody’s recently said.

Price Action: All four of BofA’s stock picks were in the black on Monday, with HDFC Bank gaining 1.03%, ICICI Bank rising 0.89%, Kotak Bank inching up 0.11% and Axis Bank trading 0.2% higher.

Shares of HDFC Bank and Kotak Mahindra Bank have seen little share price appreciation since the start of the year, however, all private banking stocks have registered gains in the last three months.

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Posted In: Analyst ColorEquitiesLarge CapNewsMarketsAnalyst RatingsMoversTrading IdeasAxis BankHDFC BankICICI BankKotak Mahindra Bank