Synopsis: The shares of these five banks are among Motilal Oswal’s top picks, backed by strong credit growth, healthy balance sheets, and upside potential of up to 37 percent.
Banking stocks are back in focus as the Q1 FY27 earnings season begins. This article outlines Motilal Oswal’s top five bank picks, the reasons behind its positive view on the sector, and why the brokerage believes these stocks could deliver healthy returns.
The brokerage expects banks to continue to see strong loan growth in the coming quarters, supported by demand from retail customers, businesses, and MSMEs. It also believes large private banks are in a better position because of their strong balance sheets, steady funding, and ability to raise money at lower costs.
Sector outlook
Credit growth likely to stay strong: Motilal Oswal expects bank credit growth to remain in the mid-to-high teens, driven by healthy demand from retail customers, businesses, and MSMEs. This steady loan growth is expected to support the banking sector over the next few quarters.
Large private banks remain the top pick: The brokerage continues to prefer them, as they are well positioned to benefit from the current economic environment. Their strong balance sheets, diversified loan books, and better execution put them in a good position to grow faster than peers.
Funding advantage through global presence: Banks with a strong international presence are expected to attract more FCNR(B) deposits, giving them access to stable and relatively low-cost funding. Large private banks can also raise cheaper overseas borrowings, which could help protect margins and support future loan growth.
Banking outlook remains positive: Motilal Oswal believes the overall environment for banks remains healthy. Better economic activity, steady demand for loans, and a stable funding environment are expected to support earnings growth across the banking sector in the coming quarters.
Motilal Oswal’s Top Bank Picks
HDFC Bank
Motilal Oswal has maintained a positive view on HDFC Bank, citing its strong balance sheet, healthy deposit franchise, and improving loan growth. The brokerage believes the bank is well placed to benefit from a supportive economic environment.
The bank is also expected to gain from its ability to mobilise FCNR(B) deposits and raise low-cost overseas borrowings. Motilal Oswal has given a target price of Rs 1,110, implying an upside of 37.3 percent.
DCB Bank
Motilal Oswal remains positive on DCB Bank due to its steady business growth and improving operating performance. The brokerage expects the bank to benefit from healthy credit demand across key lending segments.
The bank is also expected to see better earnings as loan growth remains strong and the overall banking environment stays supportive. Motilal Oswal has set a target price of Rs 235.
ICICI Bank
Motilal Oswal continues to prefer ICICI Bank, supported by its strong balance sheet, diversified loan book, and consistent execution. The brokerage believes the bank is well positioned to deliver healthy growth in the coming quarters.
ICICI Bank is also expected to benefit from stable funding, low-cost overseas borrowings, and steady credit demand. Motilal Oswal has assigned a target price of Rs 1,750.
Kotak Mahindra Bank
Motilal Oswal believes Kotak Mahindra Bank is well placed to benefit from improving economic activity and steady loan demand. Its strong balance sheet and disciplined lending approach remain key positives.
The brokerage expects the bank to deliver stable earnings growth as funding conditions remain favourable. Motilal Oswal has given a target price of Rs 470.
AU Small Finance Bank
Motilal Oswal remains constructive on AU Small Finance Bank, supported by its healthy loan growth and strong presence in the retail lending segment. The brokerage expects the bank to continue benefiting from rising credit demand.
The bank is also likely to gain from a healthy operating environment and stable funding conditions, which could support future earnings growth. Motilal Oswal has a target price of Rs 1,275.
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