HDFC Bank, SBI, ICICI Bank, KMB, Axis Bank, IndusInd: Check fresh targets for top banking stocks

Systematix Institutional Equities said net interest margins (NIMs) across its banking coverage universe are expected to remain under pressure in 2QFY27, with an average sequential decline of about 7 basis points. It said lower CASA ratios and higher liquidity, both driven by strong FCNR(B) flows, are likely to weigh on margins, even as profitability is expected to improve.

According to Systematix, deposit growth as of 15 September 2026 stood at 17.3 per cent YoY and 6.9 per cent QoQ, well above advances growth by about 300 basis points. It said higher inflation has not affected collections so far, while fresh slippages are likely to decline sequentially because of seasonality in KCC loans.

It expects PAT growth of about 15 per cent YoY for its coverage universe, excluding IndusInd Bank, driven by strong advances growth and lower provisioning costs. It covers 13 banks, with ICICI Bank, SBI and Kotak Mahindra Bank as its top picks.

Advances growth
Systematix said RBI sectoral credit data showed banking system advances grew 19 per cent YoY in August 2026, against 11 per cent a year earlier. Services remained the fastest-growing segment at 24.3 per cent, led by computer software at 41.8 per cent, NBFCs at 37.5 per cent and aviation at 32.1 per cent.

Industry credit growth rose to 18.2 per cent, with micro and small businesses growing 23 per cent, medium 31.8 per cent and large industry 14.9 per cent. Personal loans grew 16.9 per cent, compared with 11.9 per cent a year earlier. Within that, loans against jewellery rose 83.2 per cent, while advances against fixed deposits, including FCNR(B), grew 43.2 per cent.

Deposits and margins
Systematix said system deposits grew 17.3 per cent YoY and 6.9 QoQ as of 15 September 2026, against 12 per cent and 3.3 per cent as of 15 June 2026, largely on strong FCNR(B) flows. Total FCNR(B) inflows under the RBI swap window stood at $132.9 billion as of 31 August 2026.

The system credit-deposit ratio moderated to 80.8 per cent, while surplus liquidity and funding conditions remained comfortable. Fresh certificates of deposit issuance fell 16 per cent QoQ after a 49 per cent decline in the previous quarter. For its universe, deposit growth is estimated at 15.9 per cent YoY and 5.6 per cent QoQ.

Systematix said the higher share of term deposits driven by FCNR(B) flows is likely to push up deposit costs and weigh on yields on advances. It expects more than 10 basis points of sequential NIM decline at ICICI Bank, Kotak Mahindra and Karur Vysya Bank; a 5-10 basis point contraction at Bank of India, Axis Bank, HDFC Bank, IndusInd Bank and Bank of Baroda; and broadly stable NIMs at Federal Bank and Union Bank.

Fees, asset quality and earnings
Systematix said fee income should rise with advances and business activity, though it may lag advances sequentially at Federal Bank, ICICI Bank and IndusInd Bank. HDFC Bank, SBI, Bank of India, Bank of Maharashtra and Union Bank of India are expected to post fee income growth ahead of advances.  Treasury income is likely to decline across most banks as higher G-Sec yields weigh on trading gains.

Asset quality is expected to remain contained, with stable or lower credit costs at Axis Bank, ICICI Bank, HDFC Bank, Union Bank, Bank of Maharashtra, Bank of India, IndusInd Bank, Kotak Mahindra Bank and Indian Bank. Systematix expects SBI to report higher credit costs as it may use one-off gains to build provision buffers, while BOB may see higher credit costs because of a low base in 1QFY27. 

Banking stocks: Ratings and price targets
Systematix has a 'buy' rating on ICICI Bank (Target Price: Rs 1,700), State Bank of India (Target Price: 1,220), Kotak Mahindra Bank (Target Price: 515), Bank of India (Target Price: 165), Axis Bank (Target Price: 1,500), HDFC Bank (Target Price: 870), Karur Vysya Bank (Target Price: 395), Indian Bank (Target Price: 980), Bank of Maharashtra ((Target Price: 98), Union Bank of India (Target Price: 200) and Bank of Baroda (Target Price: 275).

It has a 'hold' rating on only two banking stocks namely Federal Bank and IndusInd Bank. It has given a target price of Rs 350 and Rs 950, respectively.