(Reuters) -HDFC Bank and ICICI Bank closed higher on Monday after strong results over the weekend, as investors bet on their ability to sustain loan growth and margins while managing credit costs.
The Reserve Bank of India’s easing stance and liquidity support are expected to spur credit demand and economic growth, helping Indian banks.
However, analysts warned that net interest margins may come under pressure as loan rates typically adjust faster than deposit costs.
HDFC Bank and ICICI Bank reported quarterly results above analyst estimates on Saturday, with the latter reporting a record profit.
Gains in India’s two largest private banks by assets lifted the benchmark Nifty 50 index by 1.2% on the day, while the Nifty Bank and Nifty Private Bank indexes rose about 2% each.
Analysts at Nuvama said HDFC Bank’s asset quality was the “best in class” as its pool of fresh bad loans was falling, while that of ICICI Bank was improving.
HDFC Bank expects its loan growth to be above that of the industry in fiscal year 2027, Chief Financial Officer Srinivasan Vaidyanathan said in a post-earnings call, without divulging specific targets.
The two banks are Jefferies’ top picks in the sector, with analysts highlighting their ability to expand lending margins while maintaining credit costs.
At least 16 analysts hiked their price targets on their shares after the results, per data compiled by LSEG.
The median price targets on ICICI Bank and HDFC Bank have risen to 1,600 rupees and 2,120 rupees, respectively, from 1,495 rupees and 1,970 rupees last month.
Shares of HDFC Bank closed 1% to 1,927.1 rupees on Monday, while ICICI Bank gained 0.2% to 1,409.80 rupees, after climbing as much as 2% earlier in the session.
($1 = 85.1310 Indian rupees)
(Reporting by Kashish Tandon and Ashish Chandra in Bengaluru, Siddhi Nayak in Mumbai; Editing by Nivedita Bhattacharjee, Janane Venkatraman and Mrigank Dhaniwala)
