YES Bank, Bandhan, RBL, IDFC, HDFC Bank, KMB, SBI, BOB: Target prices ahead of Q1 results

Nomura India in its Q1 preview note on banking sector suggested 'Buy' rating on five lenders namely HDFC Bank Ltd, ICICI Bank Ltd, Axis Bank Ltd, Kotak Mahindra Bank Ltd (KMB) and IDFC First Bank Ltd, with targets suggesting 4-21 per cent potential upside. The foreign brokerage suggested 'Neutral' rating on YES Bank, AU Small Finance Bank, Bandhan Bank, State Bank of India and Bank of Baroda, with three of these stocks expected to see up 6-13 per cent potential downsides.

ICICI Bank, HDFC Bank and KMB are its top banking picks.

Nomura suggested targets of Rs 950 for HDFC Bank, Rs 1,620 on ICICI Bank and Rs 1,560 on Axis Bank, suggesting double digit gains. It suggested a target of Rs 460 on Kotak Mahindra Bank, hinting at 20.6 per cent potential upside. Target for IDFC First Bank is maintained at Rs 85, hinting a modest 5 per cent upside. 
Nomura's YES Bank target of Rs 21 suggests 13.4 per cent potential downside, Bandhan Bank's target of Rs 195 hints at 6 per cent potential fall. AU SFB received a target of Rs 975, SBI Rs 1,140 and BOB Rs 300.

Nomura said banks its coverage may report modest core-PPOP growth of 12 per cent yoY, led by soft net interest income (NII) growth of 9 per cent YoY and controlled opex. It said seasonally higher credit costs may keep profit growth for banks muted at 6 per cent.

"Loan growth momentum stayed intact in June, though the more important signal this quarter is that divergence now runs within cohorts, not just across them (Fig. 10 ). We build in a mild-to-moderate NIM decline across our coverage, Federal Bank being the exception, with the drag sharper for BOB and Axis Bank," Nomura said.

Nomura said the management commentary on FCNR (B) mobilization and its potential to narrow the funding gap will be a key area of focus this earnings season. Asset quality trends remained steady, though a delayed monsoon is a watch item into H2, it said.

"Deposit growth continues to trail credit growth, keeping CD ratios elevated across the system and reinforcing our view that the FY27 margin recovery will be back-ended rather than immediate. We expect the credit-deposit growth gap to persist through 1QFY27F before narrowing from 2QFY27F as incremental FCNR(B) deposits begin to flow through," it said.