Goldman Sachs has turned constructive on a large part of India's banking universe, initiating coverage on 14 banks with a mix of Buy, Neutral and Sell ratings. The brokerage sees private banks at an inflection point, with profitability expected to become a key driver of stock performance in the current cycle.
Among private-sector banks, HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, Federal Bank and AU Bank received Buy ratings. Goldman Sachs initiated coverage on HDFC Bank with a target price of Rs 861, while ICICI Bank received a target of Rs 1,935.
The brokerage called ICICI Bank a "multi-year earnings compounding story", citing a virtuous flywheel supporting its outlook. For HDFC Bank, Goldman Sachs expects PPoP growth to inflect in FY27.
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Axis Bank was also rated Buy with a target of Rs 1,477, with the brokerage expecting PPoP recovery and relatively undemanding valuations to drive stock returns. Kotak Mahindra Bank, meanwhile, was described as an "underappreciated franchise", with a target price of Rs 509.
Goldman Sachs also sees potential in Federal Bank and AU Bank, assigning Buy ratings with targets of Rs 425 and Rs 1,270, respectively. Federal Bank was described as a "self-help story", while AU Bank's strong earnings compounding is expected to drive stock performance.
Goldman Sachs initiates coverage on 14 bank stocks.
Goldman Sachs expects core pre-provision operating profit (PPoP) growth to inflect in FY27 and accelerate into the high teens during FY27-FY29.
Goldman Sachs also remains cautious on several lenders. SBI was rated Neutral with a Rs 1,170 target, with the brokerage describing the stock's risk-reward as balanced.
For IndusInd Bank, Goldman Sachs sees the lender re-leveraging its asset franchise but considers valuations fair. IDFC First Bank also received a Neutral rating, with its improving earnings trajectory already reflected in valuations.
Among PSUs, the brokerage is particularly cautious on PNB and Bank of Baroda, both of which received Sell ratings. PNB's favourable tailwinds are expected to subside, while weak core profitability remains a concern. Bank of Baroda faces pressure from an elevated loan-to-deposit ratio and weak funding profile, which Goldman Sachs expects could weigh on growth and profitability.
RBL Bank and Yes Bank also received Sell ratings, with targets of Rs 285 and Rs 22, respectively. Goldman Sachs expects RBL's turnaround to be gradual, while it sees Yes Bank's improving return on assets as insufficient to justify its valuations.
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