Nirmal Bang has issued 'Buy' ratings for leading Indian banks as credit growth accelerates to 17.2%. The report provides aggressive target prices for ICICI, SBI, HDFC, and selected mid-sized banks.
- ICICI Bank target set at ₹1,820; SBI target at ₹1,275.
- HDFC Bank recommended as a 'Buy' due to attractive valuation (1.3x forward book).
- Loan growth accelerated to 17.2% YoY in Q1FY27.
- DCB Bank and South Indian Bank identified as top mid-sized bank picks.
The Indian banking landscape is witnessing a significant recovery in credit demand. According to a comprehensive note by Nirmal Bang Institutional Equities, the sector is poised for growth driven by healthy loan acceleration and disciplined operating costs. The brokerage highlights that loan growth climbed to 17.2% YoY in the June quarter (Q1FY27), up from 15.1% in Q3FY26.
Among the heavyweights, ICICI Bank is preferred for its best-in-class returns and operational efficiency. State Bank of India (SBI) remains the top choice for PSU exposure, bolstered by a sustainable return on assets (RoA) of 1.1–1.2%. Meanwhile, HDFC Bank is viewed as an attractive play due to its current valuation of 1.3 times the forward standalone book.
Why This Matters
BozokMedia analysis shows that the recent acceleration in system deposit growth to 14.7% is a game-changer. This growth, aided by the RBI’s concessional FCNR(B) swap facility, significantly reduces the funding gap. By mobilizing $136.4 billion through various foreign-currency channels, banks can reduce their reliance on expensive domestic bulk deposits, thereby protecting their margins.
"The transition from turnaround-led profitability to structurally sustainable returns is the key theme for mid-sized banks this year."
Moving to mid-sized players, DCB Bank is recognized for its strong execution capabilities, with an expected RoE of 14.5% by FY28. South Indian Bank is also highlighted as a prime candidate for rerating, as it transitions toward a more sustainable earnings profile with an expected RoA of 1.2%.
| Bank Name | Rating | Target Price (₹) | Key Driver |
|---|---|---|---|
| ICICI Bank | Buy | 1,820 | Best-in-class Returns |
| SBI | Buy | 1,275 | Sustainable RoA |
| HDFC Bank | Buy | 1,020 | Attractive Valuation |
| DCB Bank | Buy | 260 | Strong Execution |
Asset quality remains a strong point for the sector, with credit costs moderating to 45 basis points. The growth is being fueled by a recovery in corporate credit within private banks and RAM-led growth (Retail, Agriculture, and MSME) in PSU banks, ensuring a balanced portfolio across the industry.
Frequently Asked Questions
1. What is the target price for HDFC Bank according to Nirmal Bang?
Nirmal Bang has set a 'Buy' rating for HDFC Bank with a target price of ₹1,020.
2. Why is the banking sector seeing improved credit growth?
The growth is driven by a recovery in corporate credit, strong RAM-led growth in PSU banks, and continued demand for gold loans.