YES Bank, IndusInd Bank, SBI, BOB & more: Check latest targets after Q3 biz updates

A recent preview by JM Financial, based on provisional updates from 24 banks and four NBFCs for the third quarter of FY26, highlights continued strength in loan growth for financial stocks, contrasted by muted deposit mobilisation. Most banks are experiencing a rising credit-deposit ratio as lending outpaces the gathering of new deposits.

Aggregate loans for banks reporting provisional updates grew by 12.6% year-on-year and 4.1% sequentially in Q3FY26. Sector-wide, the figures stood at 12.0% YoY and 4.2% QoQ up to mid-December 2025. In contrast, deposit growth remained subdued at 10.3% YoY and 2.1% QoQ, compared to sector averages of 9.4% and 2.5% for the same period.

Private banks reported 12.4% YoY and 3.2% QoQ loan growth, led by HDFC Bank, Kotak Mahindra Bank, IDBI Bank, J&K Bank, and several mid-sized southern banks. PSU banks posted similar momentum, with 12.5% YoY and 4.8% QoQ loan growth, aided by Bank of Baroda, Indian Bank, Bank of Maharashtra, and UCO Bank. Small finance banks (SFBs) outperformed, seeing 19.2% YoY and 6.8% QoQ loan growth, propelled by AU SFB, Ujjivan, and Equitas.

Deposit mobilisation was less impressive, as private banks increased deposits by 11.5% YoY and 1.8% QoQ, while PSU counterparts grew by 9.2% YoY and 2.2% QoQ. Some, including Yes Bank, Bandhan Bank, and Equitas SFB, experienced quarter-on-quarter declines. SFBs, however, maintained strong deposit growth at 20.2% YoY and 4.2% QoQ. The persistent gap between credit and deposit growth has heightened competition for retail term deposits.

With loan growth outpacing deposits, credit-deposit (CD) ratios rose across the system. The system-wide CD ratio reached 81.6% as of 15 December 2025, up from 79.7% a year earlier. HDFC Bank's CD ratio stood at a high 99.5%. Several mid-sized private and PSU banks, along with SFBs, also reported significant sequential increases in their CD ratios.

Current account and savings account (CASA) balances showed mild improvement, particularly among PSU banks with 2.7% QoQ growth, while private banks remained steady. Aggregate CASA balances for the reporting sample increased 9.0% YoY and 1.3% QoQ. However, CASA ratios remained within a narrow range amid ongoing deposit competition.

Collection efficiency and asset quality showed positive movement in some SFBs. Ujjivan SFB reported a slight improvement, with collection efficiency rising to 99.7% in Q3FY26 from 99.6% in the previous quarter, and gross non-performing assets (GNPA) easing to 2.4%. Bandhan Bank also saw better collection efficiency, especially in its EEB segment, indicating improving asset quality in microfinance portfolios.

NBFCs delivered mixed results in Q3FY26. Bajaj Finance reported 22.1% YoY and 5.1% QoQ asset under management (AUM) growth, below JM Financial's estimate. Mahindra & Mahindra Financial Services (MMFS) saw a 7% YoY and 30% QoQ rise in disbursements, with improved Stage 2 assets. L&T Finance Holdings (LTFH) posted strong retail disbursements, up 49% YoY and 20% QoQ, with its retail loan book growing 21% YoY and 7% QoQ. Poonawalla Fincorp achieved AUM growth of 78% YoY and 15% QoQ, while BHFL showed robust loan asset growth but a slight slowdown in disbursements.

JM Financial remained positive on select financials, identifying Axis Bank, ICICI Bank, Bank of Baroda, SBI, Ujjivan, and DCB among banks, and Aditya Birla Capital, Shriram Housing Finance, Tata Capital, Aadhar, and PNB Housing Finance in the NBFC/HFC space as top picks. The brokerage stated: "We remain constructive on banks that have strong liability franchises, diversified loan growth engines, and robust capital and provision buffers. Mid-banks and SFBs provide higher operating leverage to a growth recovery, but remain more sensitive to the pace of normalisation in unsecured and MFI portfolios."

YES Bank Ltd is the only lender with 'sell' rating from JM Financial with a target price (TP) of Rs 19 apeice. The brokerage has given 'reduce' rating to Kotak Mahindra Bank (TP: Rs 2,160), IndusInd Bank (TP: Rs 775), Federal Bank (TP: Rs 240), Bandhan Bank (TP: Rs 335) and Equities Small Finance Bank (TP: Rs 60). 

JM Financial has 'buy' ratings on HDFC Bank (TP: Rs 1,160), ICICI Bank (TP: Rs 1,700), Axis Bank (TP: Rs 1,475), City Union Bank (TP: Rs 335), DCB Bank (TP: Rs 215), State Bank of India (TP: Rs 1,160), Bank of Baroda (TP: Rs 350) and Ujjivan Small Finance Bank (TP: Rs 65), while it has given an 'add' tag to Punjab National Bank (TP: Rs 130) and AU Small Finance Bank (TP: Rs 1,050).