UBS has maintained its Buy ratings on three major private banks with specific target prices: ICICI Bank at ₹1,800, HDFC Bank at ₹1,000, and Axis Bank at ₹1,670. According to UBS analysis, ICICI Bank stands out as the top pick among the three, while HDFC Bank offers an asymmetric upside risk-reward profile. The brokerage believes current valuations do not fully capture the structural growth premium enjoyed by leading private lenders. UBS has raised its FY27 and FY28 EPS estimates by 1-3% and continues to prefer private banks as state-owned banks' cyclical tailwinds fade.
Record-high FCNR(B) deposits of $65.3 billion as of August 21 are providing significant relief to Indian banks on funding pressure, helping boost deposit growth and improve the loan-to-deposit ratio. Systemic credit growth rose to 18.3% year-on-year as of August 15, from 17.7% on July 15, while deposit growth accelerated to 14.7% from 12.7%. The system's credit-deposit ratio eased to 82% from 83.4% a month earlier, with the incremental credit-deposit ratio falling to 98% from 110%, indicating reduced pressure on banks to raise deposits to fund loan growth. IIFL Securities estimates that FCNR(B) inflows could add around 3 percentage points to deposit growth and 3.7 percentage points to loan growth, though higher-cost deposits could reduce net interest margins by 3-15 basis points.
Differences between boards and senior management over business priorities, strategy and the pace of transformation are emerging as a factor behind CEO succession decisions at India's private-sector banks. HDFC Bank Managing Director and Chief Executive Sashidhar Jagdishan has decided not to seek a third term after his current tenure ends on October 26, 2026. Similarly, South Indian Bank Managing Director and Chief Executive P R Seshadri and Kotak Mahindra Bank Managing Director and Chief Executive Ashok Vaswani have also opted not to seek reappointment when their current terms expire. At ICICI Bank, Managing Director and Chief Executive Sandeep Bakhshi has sought a two-year reappointment rather than the three-year term generally followed by banks, with the Reserve Bank of India approving his reappointment. Industry experts warn that growing divergence between boards and executives over strategic direction could become a governance concern, particularly as banks face pressure to modernise technology, strengthen risk controls and invest for future growth.
UBS remains constructive on India's private banks, arguing that years of branch expansion are creating a structural advantage in deposit mobilisation and lending growth. As reported by UBS, ICICI Bank, Axis Bank and HDFC Bank have led branch additions over the past three to four years. The brokerage views branch expansion as a physical distribution strategy, with a wider network helping banks build stronger customer relationships, improve deposit mobilisation and support growth in business banking. The expansion is becoming increasingly important as banks compete for deposits and seek to deepen their lending franchises.
UBS' broader view is that private banks have been building their competitive advantage through sustained investments in distribution at a time when deposit mobilisation has become increasingly important. The improvement in funding position is already visible in banking data, with lending rates rising 5-45 bps month-on-month across most segments, while the median MCLR has increased by 10 bps. Despite some margin pressure from higher-cost deposits, UBS expects margins to improve ahead as lending rates continue to rise. The brokerage maintains that private banks are well positioned to continue gaining share in both deposits and credit, supported by their expanding reach and stronger franchise-building efforts. However, prolonged leadership uncertainty could delay strategic initiatives, weaken succession planning and potentially affect long-term value creation.
