ICICI Bank, HDFC Bank, SBI, Axis Bank: Which banking stock to buy ahead of Q2 results - What experts suggest
Banking stocks to buy: Investors tracking banking stocks ahead of the September-quarter earnings season will be watching loan growth, net interest margins (NIMs), deposit mobilisation and asset quality for clues about the sector's earnings outlook. While strong credit demand is expected to support profitability, higher funding costs and pressure on margins could create differences in performance across banks.
Experts expect healthy earnings growth in Q2FY27, supported by expanding balance sheets and relatively stable asset quality. However, they flag near-term pressure on private banks' margins due to inflows of foreign currency non-resident bank (FCNR-B) deposits.
Brokerages see banks reporting healthy earnings growth in Q2FY27, driven by strong loan demand and deposit mobilisation. However, pressure on net interest margins due to FCNR-B inflows and muted low-cost deposit growth could weigh on private banks' profitability.
JM Financial expects banks under its coverage to report approximately 12% year-on-year (YoY) growth in profit after tax (PAT) in Q2FY27, compared with around 13% in Q1FY27. It estimates net interest income (NII) growth of approximately 12% YoY, supported by stronger balance-sheet expansion despite margin compression.
The brokerage's provisional updates for 30 banks indicated loan growth of 19.1% YoY and 6.6% quarter-on-quarter (QoQ), while deposits grew 15.8% YoY and 5.8% QoQ. It expects NIMs to contract by 5-20 basis points QoQ, particularly at private banks, as FCNR-B deposits take time to be deployed and growth in low-cost current account and savings account (CASA) deposits remains muted.
JM Financial said: "We expect banks under our coverage to report ~12% YoY PAT growth in Q2FY27 (~13% in Q1FY27) as strong balance sheet growth offsets further NIM compression. Provisional business updates for 30 banks show loan growth accelerating sharply to ~19.1% YoY/~6.6% QoQ."
The brokerage expects operating expenditure growth of around 7% YoY to remain below balance-sheet growth of approximately 20%, supporting operating leverage. Credit costs are expected to remain benign at around 50 basis points.
Mirae Asset Sharekhan, meanwhile, projects NII growth of 11.2% YoY and PAT growth of 14.1% for its banking coverage universe. It expects loan growth of 19.4% YoY and deposit growth of 16.2% YoY, with private banks likely to outperform public sector banks in credit growth.
It expects private banks' NIMs to decline by 2-13 basis points QoQ, while public sector banks' margins are likely to remain broadly range-bound. The brokerage also expects asset quality to remain stable, with the gross non-performing asset ratio for its coverage universe potentially declining by around five basis points QoQ to 1.52%.
The brokerage said: "Q2FY27 should be a steady quarter for banks. Healthy credit growth across retail, MSME and corporate segments, along with benign credit costs, should drive profitability. Strong FCNR(B) inflows will boost deposits and liquidity but may weigh on private banks’ margins near term."
However, it cautioned that rising government bond yields could weigh on treasury income, although stake-sale gains linked to the NSE and SBI Mutual Fund IPOs could support earnings at select public sector banks.
JM Financial's preferred picks are HDFC Bank, ICICI Bank, Axis Bank, Punjab National Bank (PNB), State Bank of India (SBI), Ujjivan Small Finance Bank, City Union Bank and DCB Bank.
It remains constructive on banks with strong liability franchises, diversified growth engines and superior execution capabilities.
Among large banks, it expects Axis Bank's earnings to grow 33% YoY on a low base, followed by Kotak Mahindra Bank at 18% and ICICI Bank at 15%. In contrast, earnings growth at HDFC Bank and SBI is expected to be relatively muted at around 1% YoY.
JM Financial said: "We remain constructive on banks with strong liability franchises, diversified growth engines and superior execution capabilities. Our preferred picks: HDFC, ICICI, Axis, PNB, SBI, Ujjivan SFB, CUBK and DCB."
Mirae Asset Sharekhan's top picks are AU Small Finance Bank, Kotak Mahindra Bank and ICICI Bank.
Its estimates point to strong earnings growth at these lenders. AU Small Finance Bank's PAT is projected to rise 51.7% YoY, supported by 25.1% loan growth and easing stress. Kotak Mahindra Bank's PAT is expected to increase 32%, while ICICI Bank's PAT is forecast to grow 16% YoY.
Pranati Deva is a seasoned financial journalist with over a decade of experience in high-pressure newsroom environments, currently working as a Senior Sub Editor at LiveMint. Over the years, she has developed a reputation for sharp editorial judgement, a strong grasp of market dynamics, and the ability to translate complex financial developments into clear, engaging stories for a wide audience. <br><br> Her core areas of coverage include stock markets, leading listed companies, currencies, and commodities, with a particular strength in fast-paced, real-time market reporting. She is known for handling breaking market news, earnings-driven stock movements, and macroeconomic developments with speed, accuracy, and context—qualities that are essential in financial journalism. <br><br> Pranati has built a diverse and credible professional track record across some of India’s most respected news organisations, including MintGenie, CNBC-TV18, Business Standard and EconomicTimes.com. During her stints at these platforms, she produced data-driven market stories, curated and steered live blogs during volatile trading sessions, and conducted interviews with market veterans, fund managers, economists, and industry experts. Her work often combines on-ground reporting with analytical depth, helping readers make sense of daily market fluctuations and longer-term trends. An alumnus of the Symbiosis Institute of Media and Communications and Hansraj College, University of Delhi, Pranati brings a strong academic foundation to her journalism. She specialises in real-time financial reporting, with a keen focus on precision, balance, and insight, aiming to decode market movements in a way that is both informative and accessible to readers across experience levels.
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