Private bank stocks react to Q1 results; ICICI Bank gains while HDFC Bank, Axis Bank, Kotak Mahindra, Yes Bank decline
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Private sector banks faced pressure following their June quarter earnings, with ICICI Bank showing resilience by gaining 2.4% due to strong earnings growth, while HDFC Bank, Axis Bank, Kotak Mahindra Bank, and Yes Bank experienced declines. Analysts remain optimistic about ICICI Bank's performance, raising target prices, while HDFC Bank and Axis Bank are viewed with caution due to margin pressures. Overall, the sector is under scrutiny for net interest margin compression, but some banks are still expected to perform well.
Shares of private sector banks witnessed pressure after the announcement of their June quarter earnings, with ICICI Bank emerging as a gainer among major lenders while HDFC Bank, Axis Bank, Kotak Mahindra Bank and Yes Bank declined.
In today’s session, ICICI Bank shares rose 2.4 per cent to ₹1,480 on the NSE after reporting healthy earnings growth backed by higher net interest income, non-interest income and lower provisions.
In contrast, HDFC Bank fell over 5 per cent to ₹777.50, Axis Bank declined 5.4 per cent to ₹1,256.60, Kotak Mahindra Bank slipped 3.5 per cent to ₹376.10, while Yes Bank dropped 3.8 per cent to ₹22.71.
In addition, Yes Bank reacted negatively, declining about 4 per cent, while Punjab National Bank increased over 4 per cent.
Morgan Stanley flags margin pressure across private banks
Global brokerage Morgan Stanley said ICICI Bank reported the strongest loan growth, supported by underlying net interest margin expansion and strong traction in fee income.
The brokerage said HDFC Bank missed its net interest income estimate due to higher net interest margin compression, while Axis Bank also missed net interest income estimates because of higher net interest margin compression as an asset mix shift towards corporate loans resulted in lower loan spreads.
It added that Kotak Mahindra Bank delivered in-line net interest margins and overall performance that was better than forecasts.
Brokerages remain constructive on ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank
Nomura maintained a buy rating on ICICI Bank with a target price of ₹1,700, saying the lender stood apart in a margin-squeeze quarter with sector-leading loan growth.
The brokerage raised its FY27-28 earnings per share estimates by 5 per cent, citing sustained margins, re-accelerating loan growth and pristine asset quality.
Bernstein retained a market perform rating on ICICI Bank with a target price of ₹1,550, saying the bank delivered a standout quarter with the strongest loan growth among large private sector banks, continued deposit momentum and industry-leading net interest margins while maintaining profitability.
On HDFC Bank, Bernstein maintained an outperform rating with a target price of ₹1,150, saying healthy balance-sheet growth and resilient asset quality supported the quarter despite persistent margin pressure.
Nomura reiterated its buy rating with a target price of ₹950, stating the quarter was in line with expectations as loan and deposit growth improved while margins declined q-o-q as expected.
Jefferies maintained a buy rating with a target price of ₹1,050, saying lower operating expenses and credit costs offset a slight miss in net interest income.
Jefferies retained a buy rating on Axis Bank with a target price of ₹1,700, saying first-quarter profit of ₹71 billion was ahead of estimates due to higher net interest income, lower credit costs and lower operating expenses.
Bernstein maintained an outperform rating with a target price of ₹1,600, describing the quarter as mixed, with strong balance-sheet growth offset by margin compression.
For Kotak Mahindra Bank, Bernstein retained a market perform rating with a target price of ₹500, saying the lender delivered a steady quarter despite pressure on margins and slower deposit growth than peers.
Jefferies maintained a buy rating with a target price of ₹460, saying standalone profit was ahead of estimates on better net interest income, fee income and lower credit costs, while raising its FY27 earnings per share estimate by 2 per cent.
ICICI Bank reported a 16 per cent y-o-y increase in standalone net profit for Q1FY27 to ₹14,805 crore.
HDFC Bank reported a 5 per cent y-o-y increase in standalone net profit for Q1FY27 to ₹19,060 crore, with the bottom line supported by higher net interest income and sharply lower provisions.
Axis Bank reported a 23 per cent rise in net profit for the June quarter to ₹7,114 crore from ₹5,806 crore in the corresponding period last ye...
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Published on Hindu BusinessLine