Indian banks are entering the results season with a steady macro backdrop and improving liquidity, Jefferies said in its India Financial Daily report dated October 17. System-wide credit growth stood at 10% year-on-year (YoY) as of September 19, while deposits grew 9%, keeping the credit–deposit ratio around 80%.
Liquidity, which had tightened earlier due to advance tax payments and festive spending, has turned positive again, with a system surplus at about Rs 1.4 lakh crore. Jefferies noted that “the system remains well-funded, liquidity has turned surplus, and growth visibility for FY26 is intact.”
According to the brokerage, private banks such as HDFC, ICICI, and Kotak offer quality compounding, while SBI and PNB are likely to provide value opportunities among PSUs. In the NBFC space, Aavas, Aptus, and Can Fin stand out as Jefferies’ high-conviction bets.
“The phase ahead offers a blend of cyclical recovery and structural resilience for Indian lenders,” Jefferies said.
Jefferies on HDFC Bank: ‘Buy’
Jefferies maintained its Buy rating on HDFC Bank with a target price of Rs 1,200, implying a 21% upside. The brokerage expects loan growth to remain in line with system averages, supported by merger synergies and a resilient deposit base.
The brokerage expects return on equity (ROE) to improve to 14% in FY27 from 13% in FY26, while return on assets (ROA) should hold near 1.6%, underscoring the bank’s strong profitability. The stock trades at 2.1x FY27 estimated book value, which Jefferies calls “reasonable given its consistent profitability and margin recovery.”
Jefferies on ICICI Bank: ‘Buy’
ICICI Bank remains one of Jefferies’ top sector picks, with a target price of Rs 1,760, predicting a 24% potential upside. The brokerage cited strong risk-adjusted returns, balanced retail growth, and stable asset quality.
Jefferies projects ROE (return on equity) at 17% for FY27, with ROA (return on assets) at 2.2% both at the higher end among large-cap peers. The stock trades at 2.3x FY27 book value. “ICICI Bank continues to deliver best-in-class profitability among large private peers,” Jefferies said, adding that its diversified retail and SME portfolios will sustain growth momentum.
Jefferies on Kotak Mahindra Bank: ‘Buy’
Jefferies kept a Buy rating on Kotak Mahindra Bank, assigning a target price of Rs 2,550, a 16% upside. The brokerage said Kotak remains “best in class” on asset quality, with net NPAs below 0.5% and a strong capital base to fund expansion.
ROE is expected to recover to 13% by FY27, supported by better deposit traction and steady margin trends. Kotak’s digital push and focus on affluent retail customers are likely to drive incremental fee income. The stock trades at 1.6x FY27 book value, offering valuation comfort among large private banks.
Jefferies on Axis Bank: ‘Buy’
For Axis Bank, Jefferies reiterated its Buy call with a target of Rs 1,370, implying a 15% upside. It said improved core operating performance in Q2FY26 and lower slippages will offset temporary weakness in the agri-loan book.
Axis trades at 1.5x FY27 book value, with ROE expected at 14%. Jefferies said strong fee income and cost discipline will sustain earnings, while the bank’s corporate book remains healthy with controlled delinquencies.
Jefferies on IndusInd Bank: ‘Buy’
Jefferies maintained a Buy rating on IndusInd Bank with a target price of Rs 920 (24% upside). It expects the lender’s consolidation phase to end soon under new management, driving ROE to 7% by FY27 as margins and fee income recover.
IndusInd clarified that the Rs 260 crore accounting irregularity cited in media reports was already addressed in an earlier audit “there is no new investigation,” it said in an exchange filing. Jefferies added that growth in vehicle finance and micro-lending should support loan expansion in the coming quarters.
Jefferies on State Bank of India: ‘Buy’
Among PSU banks, State Bank of India (SBI) remains Jefferies’ top public-sector pick, with a target price of Rs 970, indicating a 9% upside. The brokerage said SBI’s large deposit base, capital adequacy, and improving return ratios “make it a steady compounder.”
SBI trades at 1.2x FY27 book value, with ROE projected near 15%. Jefferies said the lender’s diversified portfolio and strong fee income from subsidiaries ensure steady profitability despite narrower spreads.
Jefferies on Punjab National Bank: ‘Buy’
Jefferies reiterated a Buy rating on PNB, setting a target of Rs 125 for an 8% upside. It expects asset quality to improve with recoveries from legacy accounts and operating leverage to drive higher profitability.
ROE is expected to rise to 13% by FY27, aided by lower provisioning costs. Jefferies said PNB’s restructured book has largely stabilised, and loan growth is improving across retail and MSME segments.
Jefferies on Bank of Baroda: ‘Hold’
For Bank of Baroda, Jefferies has a Hold rating with a target of Rs 255, slightly below current market levels. The brokerage flagged risks from international loan exposures and slower growth but acknowledged improved asset quality and stable ROE at 14%.
It added that while BoB’s operating performance remains solid, incremental re-rating is limited at current valuations.
Jefferies on AU Small Finance Bank: ‘Buy’
Jefferies remains constructive on mid-tier lenders and rated AU Small Finance Bank a Buy with a target of Rs 910, a 14% upside. The bank trades at 2.5x FY27 book value, and ROE is expected at 15%, aided by branch expansion and strong digital adoption.
Jefferies added that AU’s well-diversified retail portfolio and technology-led cost efficiency provide an edge among small finance banks.
Jefferies on IDFC First Bank: ‘Buy’
IDFC First Bank was also rated Buy with a target of Rs 82 (14% upside). The brokerage expects steady improvement in return on equity and return on assets as funding costs decline and CASA (current and savings account) share rises.
Jefferies said that balance sheet strength and improving cost-to-income ratios make the stock “an emerging turnaround story” among mid-tier lenders.
Jefferies on top NBFC stock picks
Beyond banks, Jefferies noted that key non-banking financial companies (NBFCs) with strong growth potential and healthy balance sheets.
Jefferies on Bajaj Finance: ‘Buy’
Jefferies retained a Buy rating on Bajaj Finance with a target price of Rs 1,100, indicating a 3% upside. The brokerage expects margins to remain stable and growth to normalise after a strong FY25.
It noted that valuations are near fair levels, but robust asset quality, diverse funding, and strong cross-sell capabilities continue to make Bajaj Finance “the benchmark NBFC.”
Jefferies on Shriram Finance: ‘Buy’
Shriram Finance received a Buy rating with a target price of Rs 800, implying a 19% upside. Jefferies expects continued traction in used-vehicle and MSME financing segments, supported by improved collection efficiency.
The brokerage forecasts ROE at 16% by FY27, with spreads steady near 7%. Shriram’s diversified portfolio and focus on secured lending make it resilient to rate volatility.
Jefferies on Aavas Financiers: ‘Buy’
Jefferies named Aavas Financiers among its preferred mid-cap NBFCs, rating it Buy with a target of Rs 2,175, translating to a 35% upside.
The brokerage expects loan growth to remain healthy at over 20% CAGR through FY27, supported by strong underwriting and low credit costs. “Aavas continues to deliver consistent growth with best-in-class asset quality,” Jefferies added.
Jefferies on Aptus Value Housing: ‘Buy’
Aptus Value Housing Finance was rated Buy with a target price of Rs 420, implying a 38% upside. Jefferies said its strong distribution network in southern India, low operating costs, and focus on self-employed borrowers underpin sustainable profitability.
The brokerage expects margins to hold around 9% and credit costs to stay minimal, driving double-digit earnings growth.
Jefferies on Can Fin Homes: ‘Buy’
Can Fin Homes also features on Jefferies’ list of preferred NBFCs with a Buy rating and a target price of Rs 950, offering an 18% upside. Jefferies expects return on equity near 17%, supported by a sharp fall in borrowing costs and stable spreads.
The brokerage noted that Can Fin’s conservative underwriting, strong capital adequacy, and retail loan dominance “make it one of the most stable housing financiers in the sector.
Jefferies on L&T Finance: ‘Buy’
Jefferies kept its Buy call on L&T Finance with a target price of Rs 220. The brokerage said growth will be driven by personal, two-wheeler, and gold loans in H2FY26.
It expects ROE to rise to 14% by FY27 as the company increases its retail loan mix and further reduces wholesale exposure. “L&T Finance’s strategic pivot to retail continues to show results,” Jefferies added.
Jefferies on credit trends: 10% loan growth, liquidity surplus
Aggregate bank credit stood at Rs 210 lakh crore as of September 19, 2025, up 10% year-on-year, while deposits rose 9% to Rs 260 lakh crore, Jefferies said, citing RBI data.
System liquidity remains in surplus at Rs 1.4 lakh crore, call rates are near 5.2%, and 10-year bond yields steady at 6.5%. The brokerage said these factors support “sustained credit expansion through FY26.”
