HDFC Bank, ICICI Bank, SBI, Axis Bank, BoB, Kotak Bank: Check fresh targets for top banks

Systematix Institutional Equities said net interest margins for banks under its coverage are likely to remain flat or turn marginally lower in Q1FY27, as a higher share of corporate loans weighs on yields while the delayed repricing of term deposits offers some support.

The brokerage said aggregate profitability for its coverage universe is expected to rise 13.7 per cent year-on-year (YoY), excluding IndusInd Bank and Bank of Baroda, helped by strong advances growth and lower provisioning costs. Systematix said banking system credit growth remained strong through the quarter across services, industry and retail, even as deposit growth continued to trail advances.

It said fresh slippages are likely to rise sequentially because of seasonal pressure in KCC and select retail and MFI portfolios, though elevated provisioning buffers built in the March quarter should keep credit costs lower for many banks. 

Advances: According to RBI sectoral credit data cited by Systematix, banking system advances grew 17.7 per cent YoY in May 2026, against 9 per cent a year earlier, the highest annual growth since June 2024. Services led with 20.4 per cent  growth, driven by NBFCs at 33.7 per cent , commercial real estate at 18.7 per cent  and trade at 17.3 per cent.

Industrial credit accelerated to 17.5 per cent  from 6.2 per cent, led by micro and small industries at 26.2 per cent , medium industries at 21.2 per cent  and large industries at 14.4 per cent. Retail advances rose 15.4 per cent , with vehicle loans up 17.3 per cent  and housing loans up 10.9 per cent, while credit card outstanding growth slowed to 1.3 per cent , the weakest in five quarters. 

For its coverage universe, Systematix expects advances growth of 16.1 per cent YoY and 1.7 per cent QoQ, with Bank of Maharashtra, Bank of India, Axis Bank, SBI and Bank of Baroda outpacing the average.

Deposits and margins: RBI fortnightly data as of 15 June 2026 showed deposits grew 12 per cent YoY and 3.3 per cent QoQ, versus 10.8 per cent and 3.6 per cent  as of 15 March 2026. With advances still growing faster, the credit-deposit ratio rose to about 83.4 per cent  from about 83 per cent.

System liquidity remained largely comfortable, apart from a brief deficit between 22 and 29 June, while fresh certificate of deposit issuance fell 49 per cent QoQ. Systematix expects deposit growth of 11.8 per cent YoY and 1 per cent QoQ for its coverage banks, with Axis Bank, Bank of India, HDFC Bank, Bank of Maharashtra, Bank of Baroda, Indian Bank, ICICI Bank and Kotak Mahindra Bank likely to beat the average.

It said NIMs should remain broadly stable, with only Federal Bank, Kotak Mahindra Bank and Bank of Maharashtra likely to see lower margins for bank-specific reasons. Bank of India has the highest EBLR-linked loan share at 65.6 per cent  of advances, followed by Axis Bank at 61 per cent.

Fees, asset quality and earnings: Systematix expects fee income to decline marginally on quarter because of Q1 seasonality, though advances growth should offer support. Treasury income could be flat to better, with 10-year G-Sec yields rising 26 basis points in 1QFY27 but easing steadily since mid-May 2026.

Fresh slippages are expected to rise sequentially, but credit costs will be mixed. Axis Bank, Federal Bank, Indian Bank, Union Bank and Bank of Baroda may report lower credit costs because of floating and contingency buffers built in 4QFY26, while SBI and ICICI Bank could see provisions rise with incremental slippages.

Overall, Systematix said earnings growth in 1QFY27 should accelerate from 11.9 per cent in 4QFY26 to 13.7 per cent YoY, excluding IndusInd Bank and Bank of Baroda. Its top three picks are ICICI Bank (Target Price: Rs 1,700), SBI (Target Price: Rs 1,250) and Kotak Mahindra Bank (Target Price: Rs 475).

It has upgraded Indian Bank (Target Price: Rs 950) to 'buy' from 'hold' call. It also has a 'buy' rating on Bank of Baroda (Target Price: Rs 300), Axis Bank (Target Price: Rs 1,600), HDFC Bank (Target Price: Rs 950), Bank of India (Target Price: Rs 170) and Union Bank (Target Price: Rs 190).

On the other hand, It had downgraded Bank of Maharashtra (Target Price: Rs 96)to 'hold' from 'buy' tag. Federal Bank (Target Price: Rs 1,700) and IndusInd Bank (Target Price: Rs 975) also have a 'hold' rating from Systematix.