SBI, HDFC Bank, PNB, ICICI Bank: Nirmal Bang's top picks from banking space; check targets
Nirmal Bang continues to remain positive on banking sector as it expects select names from this space to deliver healthy return ratios and are trading at reasonable valuations.
- Sep 16, 2025,
- Updated Sep 16, 2025 3:22 PM IST
Domestic brokerage firm Nirmal Bang Institutional Equities continues to remain positive on banking sector as it expects select names from this space to deliver healthy return ratios and are trading at reasonable valuations. It has also picked select lenders and shadow lenders from the space.
Nirmal Bang Institutional Equities has conducted a study into the 20-year core business valuation trends of India’s five largest banks: SBI, HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank. The analysis examined how these banks have been re-rated through business and interest rate cycles, and how their subsidiary valuations have evolved.
These five banks account for nearly 50% of the market share in both credit and deposits. SBI has retained its leadership position across business verticals for the past two decades, while the four largest private sector banks have increased their share of credit and deposit markets.
Large private sector banks have also gained a significant share of current account (CA) deposits, aided by enhanced transaction banking services and support for small and medium enterprises. The sector’s net interest margins (NIMs) have held steady or improved, driven by stable CASA (current and savings account) ratios, lower dependence on high-cost borrowings, and a more diversified asset mix.
Digitalisation and economies of scale have enabled these banks to manage their operating expense (opex) ratios effectively. SBI and the top private sector banks now hold 41% to 80% market share in key digital payment channels, illustrating rapid adoption of new banking technologies. Asset quality and capital adequacy ratios are at their strongest levels in two decades, with return on assets (RoAs) reaching historical highs and valuations remaining reasonable.
A comparative assessment of these banks’ business verticals and financial parameters highlights that, alongside SBI, Kotak Bank, and HDFC Bank, ICICI Bank and Axis Bank continue to play major roles in the sector’s competitive environment. Structural features such as robust balance sheets and a strong digital presence remain key strengths.
Nirmal Bang Institutional Equities noted: "From the above analysis we find that SBI, Kotak Bank, and HDFC Bank are expected to deliver healthy return ratios and are trading at reasonable valuations. Kotak Bank, which has traded at P/ABV (excluding subsidiary value) of 4.6x/3.4x in the past 20 years/5 years and is expected to deliver RoA of over 2% in FY27E (similar to ICICI Bank), is trading at 1.9x FY27E, a 24.2% discount to ICICI Bank’s valuations. SBI, likely to sustain over 1% RoAs, is trading at attractive valuations of 1x FY27E ABV. HDFC Bank, which has traded at P/ABV (excluding subsidiary value) of 3.6x/2.9x in the past 20 years/5 years and is expected to deliver healthy RoA of 1.9% over FY25-FY28E, is trading at 2.2x FY27E ABV, a 12.4% discount to ICICI Bank’s valuations."
From the largecap basket, Nirmal Bang has chosen State Bank of India (Target Price: Rs 1,039), Kotak Mahindra Bank (Target Price: Rs 2,507) and HDFC Bank (Target Price: Rs 1,164) as its top picks. Besides them, it has penciled City Union Bank (Target Price: Rs 260), AU Bank (Target Price: Rs 916), Hudco ((Target Price: Rs 267) and Home First Finance (Target Price: Rs 1,619) as top picks.
Nirmal Bang also has a 'buy' ratings on ICICI Bank (Target Price: Rs 1,700), DCB Bank (Target Price: Rs 177), Bank of Baroda (Target Price: Rs 303), LIC Housing Finance (Target Price: Rs 721), PNB Housing Finance (Target Price: Rs 1,000), Can Fin Homes (Target Price: Rs 931), Repco Housing Finance (Target Price: Rs 424) and Aavas Financiers (Target Price: Rs 1,900).
It has ascribed a 'hold' rating for Axis Bank (Target Price: Rs 1,200), IndusInd Bank (Target Price: Rs 811), Bandhan Bank (Target Price: Rs 183), (Target Price: Rs 215), Punjab National Bank (Target Price: Rs 113), Equitas Small Finance Bank (Target Price: Rs 58). RBL Bank is the only lender with a 'sell' rating and a target rice of Rs 246.
Domestic brokerage firm Nirmal Bang Institutional Equities continues to remain positive on banking sector as it expects select names from this space to deliver healthy return ratios and are trading at reasonable valuations. It has also picked select lenders and shadow lenders from the space.
Nirmal Bang Institutional Equities has conducted a study into the 20-year core business valuation trends of India’s five largest banks: SBI, HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank. The analysis examined how these banks have been re-rated through business and interest rate cycles, and how their subsidiary valuations have evolved.
These five banks account for nearly 50% of the market share in both credit and deposits. SBI has retained its leadership position across business verticals for the past two decades, while the four largest private sector banks have increased their share of credit and deposit markets.
Large private sector banks have also gained a significant share of current account (CA) deposits, aided by enhanced transaction banking services and support for small and medium enterprises. The sector’s net interest margins (NIMs) have held steady or improved, driven by stable CASA (current and savings account) ratios, lower dependence on high-cost borrowings, and a more diversified asset mix.
Digitalisation and economies of scale have enabled these banks to manage their operating expense (opex) ratios effectively. SBI and the top private sector banks now hold 41% to 80% market share in key digital payment channels, illustrating rapid adoption of new banking technologies. Asset quality and capital adequacy ratios are at their strongest levels in two decades, with return on assets (RoAs) reaching historical highs and valuations remaining reasonable.
A comparative assessment of these banks’ business verticals and financial parameters highlights that, alongside SBI, Kotak Bank, and HDFC Bank, ICICI Bank and Axis Bank continue to play major roles in the sector’s competitive environment. Structural features such as robust balance sheets and a strong digital presence remain key strengths.
Nirmal Bang Institutional Equities noted: "From the above analysis we find that SBI, Kotak Bank, and HDFC Bank are expected to deliver healthy return ratios and are trading at reasonable valuations. Kotak Bank, which has traded at P/ABV (excluding subsidiary value) of 4.6x/3.4x in the past 20 years/5 years and is expected to deliver RoA of over 2% in FY27E (similar to ICICI Bank), is trading at 1.9x FY27E, a 24.2% discount to ICICI Bank’s valuations. SBI, likely to sustain over 1% RoAs, is trading at attractive valuations of 1x FY27E ABV. HDFC Bank, which has traded at P/ABV (excluding subsidiary value) of 3.6x/2.9x in the past 20 years/5 years and is expected to deliver healthy RoA of 1.9% over FY25-FY28E, is trading at 2.2x FY27E ABV, a 12.4% discount to ICICI Bank’s valuations."
From the largecap basket, Nirmal Bang has chosen State Bank of India (Target Price: Rs 1,039), Kotak Mahindra Bank (Target Price: Rs 2,507) and HDFC Bank (Target Price: Rs 1,164) as its top picks. Besides them, it has penciled City Union Bank (Target Price: Rs 260), AU Bank (Target Price: Rs 916), Hudco ((Target Price: Rs 267) and Home First Finance (Target Price: Rs 1,619) as top picks.
Nirmal Bang also has a 'buy' ratings on ICICI Bank (Target Price: Rs 1,700), DCB Bank (Target Price: Rs 177), Bank of Baroda (Target Price: Rs 303), LIC Housing Finance (Target Price: Rs 721), PNB Housing Finance (Target Price: Rs 1,000), Can Fin Homes (Target Price: Rs 931), Repco Housing Finance (Target Price: Rs 424) and Aavas Financiers (Target Price: Rs 1,900).
It has ascribed a 'hold' rating for Axis Bank (Target Price: Rs 1,200), IndusInd Bank (Target Price: Rs 811), Bandhan Bank (Target Price: Rs 183), (Target Price: Rs 215), Punjab National Bank (Target Price: Rs 113), Equitas Small Finance Bank (Target Price: Rs 58). RBL Bank is the only lender with a 'sell' rating and a target rice of Rs 246.