Goldman Sachs picks ICICI Bank, Kotak Mahindra Bank as top banking bets

Mumbai: Goldman Sachs has initiated coverage on 14 Indian banks, with ICICI Bank and Kotak Mahindra Bank emerging as its top picks. The brokerage sees up to 37% upside across its coverage, as it expects the banking sector to enter a cyclical earnings recovery supported by healthy loan growth, improving liquidity, recovering net interest margins (NIMs) and benign asset quality.

Goldman Sachs initiated Buy ratings on ICICI Bank with a target price of ₹1,935, implying 37% upside, and Kotak Mahindra Bank at ₹509, implying 31% upside.

It also initiated HDFC Bank at ₹861, implying a 19% upside, Axis Bank at ₹1,477 with 19% upside, Federal Bank at ₹425 with 19% upside and AU Small Finance Bank at ₹1,270 with 18% upside.


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The brokerage initiated Neutral ratings on IndusInd Bank, IDFC First Bank, Bandhan Bank and State Bank of India. It set target prices of ₹1,020 for IndusInd Bank, ₹92 for IDFC First Bank, ₹180 for Bandhan Bank and ₹1,170 for SBI.

Goldman Sachs said the earnings recovery at mid-sized private banks is already reflected to a large extent in valuations, while further re-rating would require sustained RoEs above the cost of equity.

On the 'Sell' side, Goldman Sachs initiated RBL Bank with a target price of ₹285, implying 26% downside, while Yes Bank was assigned a target of ₹22, implying 2.1% downside. Bank of Baroda and Punjab National Bank were also initiated at Sell, with target prices of ₹245 and ₹103, respectively.

Goldman Sachs expects private banks to outperform state-owned banks over the next two years on loan growth, NIMs and asset quality. It expects private banks to accelerate loan growth above system levels, supported by stronger FCNR(B) deposit mobilisation and a recovery in unsecured lending as asset-quality concerns ease. The brokerage expects system loan growth to remain at around 14-15% during FY26-FY29E, while deposit growth is expected to accelerate as liquidity improves.

NIMs are expected to trough over the next two quarters before gradually recovering. Goldman Sachs also expects asset quality to remain benign, with stress largely confined to granular unsecured loans.

For state-owned banks, Goldman Sachs expects gradual credit-cost normalisation and structurally lower core PPoP margins to weigh on RoA progression.