This positive reassessment of large banks aligns with broader expectations of sectoral tailwinds. Gurmeet Chadha, Managing Partner and CIO at Complete Circle Consultants, highlighted that “the top 3–4 banks (ICICI, HDFC, SBI) may see some re-rating as interest rates fall, credit growth picks up and NIMs stabilise & start improving.”
He further added that “corporate loan book growth will also surprise,” underlining the upside potential in loan expansion across key segments.
Link: https://x.com/connectgurmeet/status/1988833467170173338
He expects that a surge in corporate loan book growth and stronger-than-expected retail loan expansion are also expected to boost the valuation outlook of India’s top lenders.
Even various brokerage firms had echoed this optimism with their respective stock ratings and forecasts.Morgan Stanley, post the Q2 results of HDFC Bank, had reiterated an ‘Overweight’ rating on the stock, assigning a target price of Rs 1,225. The firm anticipates that HDFC’s loan growth will align with the broader banking sector by FY26, supported by resumed market share gains.The report notes that HDFC Bank’s net interest margin appears to have bottomed out, while strong asset quality and technology-led operating leverage are expected to drive growth. According to the brokerage, these factors could result in a core pre-provision operating profit (PPOP) CAGR of approximately 19% between FY26 and FY28, as opposed to 9% projected for FY26 alone.
In a similar view, Morgan Stanley had maintained its ‘Overweight’ stance on ICICI Bank as well, setting a target price of Rs 1,800. The brokerage cited strong deposit growth, with CASA deposits up 10% YoY and total deposits rising 9% YoY. The Liquidity Coverage Ratio (LCR) also showed healthy gains, rising 12% YoY. The bank’s loan growth rose 3% QoQ, mainly driven by the retail segment.
Notably, the net interest margin (NIM) excluding the IT refund stood at 4.30%, up 3 basis points quarter-on-quarter. Net interest income (NII) also rose 7% YoY, exceeding estimates by 1%.
Meanwhile, earlier in September, global brokerage firm Citi had re-initiated coverage on State Bank of India (SBI) with a ‘Buy’ rating and a target price of Rs 1,050. Citi’s thesis is based on SBI’s strong credit growth visibility, enhanced return metrics, and operational efficiencies.
The brokerage believes that robust traction in corporate and home loan segments, supported by strategies like liability-cost optimisation and yield management, positions SBI well for sustained growth. For FY26–FY27E, Citi projects a loan growth of 13–14% annually, with NIMs in the 2.8–2.9% range and benign credit costs of 40–45 basis points.
Forecasting a return on assets (ROA) of 1% and return on equity (ROE) of 14–15%, Citi has identified SBI as its preferred pick among public sector banks.
As macroeconomic trends turn favourable and earnings visibility improves, these brokerage views and market signals suggest a constructive stance on India’s top banking names.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)