Banks share price target

Bank credit growth remained healthy in Aug'26, with gross bank credit rising 19.1% YoY and 1.4% MoM to Rs223.9tn, while non-food credit grew 18.8% YoY. Growth stayed broad-based, agriculture credit expanded 17.2% YoY, industrial credit moderated to 18.2% YoY and services credit accelerated to 24.3% YoY. Within industry, growth was led by Medium Industries (+31.8% YoY) and MSMEs (+23.0% YoY), while services growth was supported by NBFCs (+37.5% YoY), commercial real estate (+22.5% YoY) and trade (+20.1% YoY). Retail credit improved to 16.9% YoY, driven by vehicle loans (+19.7% YoY) and continued strong growth in gold loans (+83.2% YoY), while credit card growth...

We are pleased to share our latest flash note on Banks and NBFCs, which analyses Q2FY27E provisional business updates across key lenders.

Credit card spending activity moderated in Aug'26, with industry spends declining to Rs2.02 tn, down 2.8% MoM but up 5.9% YoY. Cards-in-force continued to witness healthy traction, reaching 124.05 mn, up 10.27% YoY and 1.0% MoM. Net new card additions eased to 1.20 mn from 1.27 mn in Jul'26, led by SBI (0.19 mn), ICICI Bank (0.14 mn) and HDFC Bank (0.12 mn). Transaction volumes continued to improve to 632.45 mn, growing 4.5% MoM and 28.1% YoY. This indicates sustained card usage even as average ticket sizes declined (7% MoM). The divergence between rising volumes and softer spends points to a shift towards lower-value transactions, while...

IRDAI Distribution Reforms: Structural Reset in Distribution Economics

Retail and agriculture supported NBFC credit growth: Retail loans accelerated to 21.4% YoY from 13.7% a year ago, led by gold loans (+68.5% YoY), consumer durables (+51.5%), vehicle loans (+15.1%) and housing (+11.9%), while agriculture credit accelerated to 18.0% YoY from 5.4% a year ago. Services growth moderated and industry remained subdued: Services credit grew 15.2% YoY vs 24.5% a year ago, despite strong commercial real estate growth of 22.3% YoY. While Industrial credit grew 7.4% YoY, with infrastructure credit at 6.2% YoY, reflecting continued moderation in the segment....

Banking non-food credit growth remained strong in Jul'26, with gross bank credit rising 19.3% YoY and 2.6% MoM to Rs220.8tn, while non-food credit grew 19.1% YoY. Growth remained broad-based across key segments, with agriculture credit expanding 17.0% YoY, industrial credit accelerating to 20.0% YoY and services credit rising 22.9% YoY. Within industry, growth was led by MSMEs (+22.6% YoY) and Medium Industries (+30.5% YoY), while services growth was supported by NBFCs (+35.7% YoY) and trade (+19.8% YoY). Retail credit remained healthy at 16.2% YoY, driven by vehicle loans (+18.8% YoY) and continued strong growth in gold loans...

Banking sector credit growth strengthened in May'26, with gross credit rising 17.7% YoY and 1.4% MoM to Rs215.2 tn. Non-food credit accelerated to 17.4% YoY, led by broad-based growth across industry, services and agriculture. Agriculture credit grew 14.9% YoY, while industrial credit remained robust at 17.5% YoY, supported by strong lending to MSMEs and large corporates. Services credit accelerated to 20.4% YoY, driven by NBFCs, commercial real estate and trade. Retail loan growth remained healthy at 15.4% YoY, supported by vehicle and housing loans, while gold loans continued to witness exceptional growth of 105.5% YoY. Looking ahead, credit...

Indicators point to falling liquidity, rising CPI and repo hike Higher corporate/MSME share to affect PSBs/MidCs Rate hike to benefit PVBs due to higher retail/EBLR exposure RBI could hike the repo rate in Oct'26 as CPI, which is rising, may firm up to ~6% in Q3FY27. Tight liquidity over Dec'25 to May'26 led to increase in bulk TD rates by 60144bps. As G-Sec to NDTL ratio for system fell to 27% in Mar'26 (H2'25: 30%), RBI has limited headroom to shore up liquidity. While the FCNR scheme may cushion interest rates, system loan growth may decline to 12-13% YoY in Mar'27 from 15-16% in Mar'26. In a tighter credit cycle exposed to growth/asset quality shocks, PSBs/MidCs are more...

BFSI coverage closed FY26 on a constructive footing. Q4FY26 results were marked by (a) NIM compression at private banks as EBLR books absorbed the RBI repo-rate cuts ahead of deposit re-pricing, (b) multi-year best asset quality across banks and NBFCs with pre-emptive provisioning buffers built against the West Asia / oil-price overlay, (c) sustained 20%+ AUM growth at affordable HFCs and a structural surge in gold-loan NBFCs, (d) resilient growth in secured lending across banks and SFBs despite a broader slowdown in system credit growth, and (e) continued stress in unsecured and MFI portfolios, although improving collection efficiencies and moderating credit costs indicate a gradual recovery in 2HFY26. We maintain a constructive stance 17 BUYs and 1 HOLD across the 18-stock universe....

Credit card spends moderated in Apr'26 after the sharp year-end rebound seen in March, with total spends declining to 1.98L Cr from 2.20L Cr in Mar'26. Spends declined ~10.1% MoM (vs ~23.8% growth in Mar'26), while YoY growth softened to ~7.1% (vs ~8.9%), reflecting normalisation after financial year-end spending. Cards-in-force continued to expand, reaching ~119.44 Mn, up ~8.1% YoY and ~0.8% MoM. Net new card additions remained stable at ~9.7 lakh, led by SBI (~1.4 lakh), HDFCB (~1.3 lakh) and AXISB (~0.6 lakh). Transaction volumes also moderated, declining ~3.3% MoM (vs ~16.8% growth in Mar'26), though YoY growth remained healthy at ~23.4% (vs ~25.2%). March spending was aided by year-end transactions and...

Top Conviction Ideas - Banks, Financial Services and Insurance (BFSI)

Lending rates declined while deposit rates were mixed in Mar'26: The TD rate on outstanding deposits remained unchanged at 6.62% for SCBs, while the rate on fresh deposits increased 42 bps MoM to 6.07%, partly reflecting year-end deposit mobilisation. The WALR on fresh rupee loans declined 4 bps MoM in Mar'26. As of Mar'26, WALR on fresh rupee loans stood at 8.40%, while WALR on outstanding rupee loans was 8.99%. Outlook: Banking sector credit growth recovered to about 16% in FY26 from about 11% in FY25, driven by broad-based expansion across retail, services and industrial...

Credit card spends saw a sharp rebound in Mar'26, rising to 2.20L Cr from 1.78L Cr in Feb'26. Spends increased ~23.8% MoM (vs ~10.9% decline in Feb'26), while YoY growth improved to ~8.9% (vs ~6.0%), driven by financial year-end transactions and higher discretionary spending. Cards-in-force continued to expand, reaching ~118.46 Mn, up ~7.8% YoY and ~0.7% MoM. Net new card additions remained stable at ~8.8 lakh, led by HDFCB (~0.5 lakh), AXISB (~1.3 lakh) and SBI (~1.3 lakh). Transaction volumes also rebounded strongly, rising ~16.8% MoM (vs ~8.6% decline in Feb'26) and ~25.2% YoY (vs ~24%), indicating...

Loan/deposit growth improves QoQ due to liquidity crunch NIM to soften QoQ; core PPoP better for PVBs over PSBs Prefer KMB, ICICIB and SBI among our coverage universe Banks under our coverage are likely to see a steady quarter; core earnings (ex-IIB) may increase by 1.5% QoQ to INR 671bn (+10.2% QoQ in Q3FY26) as core PPoP might inch up by 2.2% QoQ. Loan momentum is expected to sustain; we see 5.0% QoQ growth (4.6% in Q3'26). Deposit accretion is likely to pick-up to 5.6% QoQ (2.2% in Q3'26) as Q4 is seasonally strong and corporates preferred to maintain higher cash in form of CA...

Our Key Result Plays are as follows: Positive Result Plays Banks: ICICI Bank, State Bank of India, Federal Bank, AU Small Finance Bank, Ujjivan Small Finance Bank NBFCs: Cholamandalam Investment & Finance, CreditAccess Grameen, Bajaj Finance, Can Fin Homes

India's affordable housing finance sector is entering a structural growth phase, supported by favorable macroeconomic conditions, low mortgage penetration and sustained policy impetus. With mortgage-to-GDP at ~16.6%, materially below global benchmarks, the sector offers significant headroom for long-term expansion. Structural drivers including urbanization, rising income levels, financial formalization and continued government support through schemes such as Pradhan Mantri Awas Yojana (PMAY) are expected to underpin housing demand. We initiate coverage on select Affordable Housing Finance Companies...

Banks and NBFCs Sector Update - Fundamentals Firm, Valuations Now More Compelling

Banking sector non-food credit growth remained steady at 14.4% YoY, with sequential momentum moderating to 1% MoM in Jan'26. As per the latest sectoral deployment data, credit growth across agriculture, industry, personal loans and services continued to register healthy double digit YoY expansion during the month. Agriculture loan growth stood at 11% YoY in Jan'26, while credit to industries grew at 12% YoY. Services sector credit growth remained stable at 15% YoY in Jan'26, with lending to NBFCs witnessing strong traction at 18% YoY. Retail loan growth sustained at 15% YoY in Jan'26, led by unsecured loans at 12% YoY and a sharp surge...

After a strong festive-led December, credit card spends moderated in Jan'26 to 1.99L Cr from 2.05L Cr in Dec'25. Spends declined ~2.7% MoM (vs ~8.4% growth in Dec'25), while YoY growth softened to ~8.1% (vs ~8.8%), reflecting both a high base and post-festive normalisation. Cards-in-force increased to ~116.56 Mn, up ~7.1% YoY and ~0.7% MoM. Net new card additions eased to ~8.4 lakh (vs ~8.9 lakh in Dec'25), led by HDFCB (~3.1 lakh), AXISB (~0.9 lakh) and SBI (~0.9 lakh). Transaction volumes remained largely stable, dipping marginally by ~0.1% MoM (vs ~7.2% growth in Dec'25), while sustaining healthy ~24.9% YoY growth (vs ~24.3%). Credit card spending growth moderated to ~8% in January, marking a...

growth. PSB may continue to grow well till H1FY27, post which, PVB may outperform due to constrained deposit accretion and loan growth gap between them reversing. We prefer banks with (1) higher LCR/lower LDR, (2) faster...