The banking sector has been on a high and two banks that delivered their numbers over the weekend, HDFC Bank and ICICI Bank have seen significant buying on improved asset quality and string Q4 performance. Given the RBI’s liquidity boost, rate cuts and the overall Govt push for domestic themes, financials are seeing significant buying interest. The latest Buy recommendations from Jefferies is no exception.
Jefferies on HDFC Bank
HDFC Bank is one of the top picks for Jefferies in the sector. They have retained the Buy call with a price target to Rs 2,340 (from Rs2,120). The price target implies 19% upside from current levels. It is based on assumption of “2.5x June, 2027 adjusted PB and value of stake in subsidiaries,” explained Jefferies.
While hey have lowered the estimates for FY26-27 earnings by 3-4% due to drag on NIMs, they feel “improvement in growth momentum and stable asset quality are positive re-rating catalysts.”
According to Jefferies, the bank’s loan growth will continue to improve over FY26 & FY27. They expect the “bank’s deposit growth to stay healthy at 16% and LDR correction in FY26 & FY27 will be much lower than 8ppt in FY25.”
They see room for “improvement in loan mix with scope to lift share of unsecured loans.”
The only risk of downside would come from “near-term pressure on NIMs arising from Repo Rate cuts that drives timing gap in repricing of loans and deposits.” However, they highlighted that the banks’ 25 bps cut in savings deposits and 20 bps cut in peak term deposit rates, along with future cuts, will help to manage impact.
Jefferies on ICICI Bank
ICICI Bank is another banking counter that stays among top picks for Jefferies, in the financia sector. They have lowered the earnings estimates by 5% due to “near-term impact of rate cuts on NIMs,”
They expect the bank “to deliver 12% CAGR in profit over FY25-28 with ROE of 16% in FY26.”
They have a target of Rs 1,710 based on 2.6x Jun-27E adjusted PB. The target price implies 21% upside from current levels.
ICICI Bank continues to deliver well on earnings with profit of Rs 12,600 crore, up 18% YoY. “CASA growth of 13% (ratio flattish YoY) was key positive trend that aids loan growth and core NIM,” added Jefferies. They added that the “aAsset quality is holding-up with core retail slippages down QoQ. We trim EPS for FY26-27 by 5% to factor timing gap.”