The Middle East conflict will not have a visible stress on lenders such as ICICI Bank and Axis Bank, according to Citi.
The brokerage, in its recent note has maintained a buy rating on both stocks. The target price for Axis Bank has been set at Rs 1,620, marking a 30.8% upside from its last closing price. For ICICI Bank, the target price is 1720, a 38.6% upside.
Impact of Middle East conflict on Axis Bank
According to Citi, Axis Bank will not witness any visible deterioration and likely carries sufficient buffer to absorb the consequences of the Middle East crisis. The buffer is expected to be sufficient to absorb slippages even in the most adverse scenario, the note says.
The management remains comfortable on both growth and asset quality. Retail book continues to hold well on the wholesale side, better profitability has emerged on certain segments, while impacted segments are actively optimizing costs to manage margins. Citi estimates that Axis Bank is likely to deliver positive operating leverage in FY27 and cost to assets will be optimised over the medium term.
Impact of Middle East conflict on ICICI Bank
For ICICI Bank, Citi says that the lender's portfolio currently shows no visible stress due to the Middle East tensions. The bank is actively monitoring corporate and business banking segments exposed to global trade and supply chain disruptions, with tighter credit filters applied to new borrower onboarding in vulnerable sectors.
The lender's corporate growth supported by a structural shift in funding from bond markets to banks, while NIMs remain range-bound. Additionally, continuous borrower engagement is maintained to manage emerging risks. In terms of segments, secured retail is holding well and steady, while unsecured lending, with underwriting quality over the past 18 months provides confidence to grow.
Business banking credit cost remains stable, while IT sector's hiring slowdown is being compensated by GCC growth. Citi expects that potential FY27 tailwind exists should the agriculture Priority Sector Lending provision created in in the third quarter will be reversed.
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