Nitin Aggarwal, Senior Group Vice President and Head of BFSI Institutional Equities at Motilal Oswal Financial Services (MOFSL), said ICICI Bank remains the preferred pick, while HDFC Bank could see better earnings growth under its new leadership.
“We were projecting close to 19% sequential growth, but bank further did better than what we estimated, and that is driving some bit of an earnings upgrade for the bank and alongside the potential turn in the rate cycle, which has already happened and will progress further,” Nitin Aggarwal, Senior Group VP, Head- BFSI, Institutional Equities at MOFSL, said, referring to ICICI Bank.
MOFSL expects ICICI Bank to maintain return on assets (ROA) in the 2.3-2.4% range, supported by industry-leading growth. The brokerage continues to rate the stock as a buy, making it one of its preferred banking picks.
HDFC Bank is also expected to deliver better results as business growth continues and the impact of interest rate changes gradually feeds through. While the bank reported a decline in net interest margins (NIMs) during the quarter, Aggarwal said this trend was visible across the three large private sector banks.
However, MOFSL expects earnings to improve as interest rate transmission supports margins and loan growth remains healthy. HDFC Bank is also undergoing a leadership transition, with the brokerage expecting the new leadership team to focus on strategy and address operational gaps.
“We are estimating 15% earnings growth versus close to 6-7% average growth that we have seen over the past few years,” Aggarwal said.
MOFSL maintains a buy rating on HDFC Bank and expects an improvement in its operating performance in the coming quarters, particularly from early FY28, to support the stock’s performance.
The brokerage has maintained a neutral stance on Axis Bank for the past two years, while Federal Bank remains one of its preferred picks among mid-sized banks.
The outlook for the banking sector will also depend on banks’ ability to sustain loan growth without putting further pressure on deposit costs.
For the entire discussion, watch the accompanying video
ICICI Bank, HDFC Bank earnings to improve as rate transmission kicks in: MOFSL
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