Goldman Sachs has initiated coverage on 14 Indian banks with a mix of Buy, Neutral and Sell ratings, marking a significant expansion in banking sector analysis. The brokerage's framework focuses on earnings acceleration, franchise strength and valuations, while it sees private banks at an inflection point with profitability and return on assets (ROA) normalisation as key drivers of stock performance. Among private-sector banks, HDFC Bank received a Buy rating with target price of ₹861, implying 19% upside, while Axis Bank was assigned a Buy rating with target price of ₹1,477, representing 19% upside. The firm expects core pre-provision operating profit (PPoP) growth to inflect in FY27 and accelerate into the high teens during FY27-FY9.
Goldman Sachs has assigned SELL ratings to four banking stocks including RBL Bank with a target price of ₹285, indicating 27% downside from current levels, Yes Bank at ₹22 with 4% downside, Bank of Baroda at ₹245 with broadly flat returns, and Punjab National Bank at ₹103 with 12% downside. According to ET Now, the brokerage has adopted a cautious stance on the banking sector despite supportive GDP growth and favourable monetary environment over the past five years. During this period, foreign institutional investors (FIIs) reduced their holdings in the Indian financial sector by around USD 26 billion. RBL Bank shares closed at ₹391.35 on Friday, down 0.24%, while the stock has gained 54.59% over the past year and 24.12% year-to-date. Yes Bank shares closed at ₹22.75, gaining 0.044%, with the stock up 17.95% over the past year. Bank of Baroda shares closed at ₹246.20, up 0.88%, though the stock has declined 18.54% year-to-date. Punjab National Bank shares have gained 10.69% over the past year.
Private banks in India have de-rated over the past five years despite a supportive macroeconomic backdrop, with slower deposit growth, compression in risk spreads and a more challenging operating environment weighing on growth and returns, according to Goldman Sachs. The brokerage expects these structural pressures to persist, making deeper customer wallet-share penetration, expansion into higher-margin commercial retail segments and operating leverage increasingly important for private banks to sustain profitability. A sustained re-rating of private banks will depend on loan growth reviving to 1.5-2 times nominal GDP growth, alongside an improvement in profitability. Goldman Sachs favours ICICI Bank as its top pick, citing its relatively early start to a customer-centric approach, superior organisational structure and multipurpose branch ecosystem, while noting the lender has just approved a $5 billion overseas borrowing limit as an enabling resolution.
Goldman Sachs expects the banking sector to enter a cyclical earnings recovery supported by healthy loan growth, improving asset quality, stable margins and strong balance sheets. The brokerage anticipates that private banks will surpass their state-owned counterparts in performance over the next two years, buoyed by loan growth and enhanced liquidity. 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 forecasts 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, while asset quality is anticipated to remain benign with stress largely confined to granular unsecured loans.
According to Essential Business Intelligence, nearly two-thirds of the stocks in Morgan Stanley's coverage universe reported earnings growth during the quarter. For the Sensex and Nifty indices, revenue growth exceeded expectations by 3 percentage points, while net profit growth surpassed forecasts by 8 percentage points and 9 percentage points respectively. As per Business Upturn, Desai highlights that broad market earnings growth continued to outpace the narrow market indices, a detail that speaks to genuine breadth beneath the headline index numbers. The broader market posted revenue growth of 22% and net profit growth of 12 year-over-year, with margins contracting 170 basis points. Seven out of 10 sectors covered reported positive earnings growth, pointing to a broader recovery beyond a handful of index heavyweights.
The assessment comes as India's banking system remains financially strong, with RBI Deputy Governor Shirish Chandra Murmu stating at the CNBC-TV18 Banking Transformation Summit that the sector has a capital-to-risk-weighted-assets ratio (CRAR) of 17.7%, while aggregate profit after tax has exceeded ₹4 lakh crore. As per CNBC TV18, Murmu noted that gross non-performing assets have declined to 1.8%, while stress tests indicate that the banking system is well placed to absorb adverse shocks. He emphasized that resilience should be built into the design of growth, not bolted on after the expansion has already happened, cautioning against assessing banking performance solely by balance-sheet expansion. Murmu also highlighted that while outstanding commercial credit expanded 14% over the year, the share of fresh businesses entering the formal credit system declined from 52% in 2022-23 to 42% in 2025-26.
