The focus is on banks now- JPMorgan is expecting a jump in the banking sector returns over FY26 -FY28. According to the international brokerage house, liquidity has stabilised, corporate balance sheets are unusually clean, and these help in limiting the downside and the visibility of earnings growth is clearer than it has been in several years. Therefore, what are the top picks by JPMorgan? They have assigned ratings on 13 banks, including seven Overweights, four Neutrals, and two Underweights, with the upside potential for some banks being as much as 26.4%.
Here is a quick look at the investment rationale for JPMorgan’s top banking picks and the investment rationale for each
JPMorgan on ICICI Bank: ‘Overweight’
JPMorgan assigns ICICI Bank a target price of Rs 1,650, implying a 20.1% upside. The brokerage argues that ICICI has delivered one of the most consistent operating performances in the sector because it grows by managing risk rather than chasing volumes for appearance. ICICI’s deposit franchise has remained strong across noisy quarters, allowing the bank to keep gaining market share even when liquidity tightened.
The report states that ICICI is well-positioned to benefit from the pause in the rate-cut cycle, since the bank’s asset mix includes a rising share of unsecured lending that supports margins without exposing it to disproportionate credit risk. It adds that the 7% de-rating the stock absorbed in recent months was tied more to leadership transition speculation than to financial performance. Earnings estimates remain stable, RoA remains strong, and JPMorgan sees the valuation gap as an unnecessary penalty that does not match the bank’s fundamentals.
JPMorgan on Kotak Mahindra Bank: ‘Overweight’
Kotak Mahindra Bank receives a target price of Rs 2,625, suggesting a 26.2% upside. JPMorgan presents Kotak as the large private bank with the most powerful earnings trajectory, expecting more than 20% earnings CAGR from FY26 to FY28. The bank’s balance sheet is described as exceptionally clean, supported by a high CASA ratio and abundant capital that gives it freedom to grow without stretching liquidity.
The report also emphasises that Kotak’s unsecured lending revival is a meaningful margin lever that feeds directly into RoA improvement. Its wealth management and AMC businesses gain value in an economy where household money increasingly moves into financial products. JPMorgan treats these businesses as sources of embedded value that the market has not fully priced in. The one caution the report attaches is the possibility of expensive acquisitions, although this is framed as a general risk, not an immediate concern.
JPMorgan on State Bank of India: ‘Overweight’
State Bank of India carries a target price of Rs 1,170, indicating a 20.9% upside. JPMorgan underlines that SBI has expanded its consolidated market share in deposits and advances across a decade marked by sector mergers and consolidation. It also states that SBI’s operational improvements, particularly in mortgage processing and retail loan turnaround times, have been substantial enough to change how the bank competes with private peers.
The report identifies RoA in the 0.8 to 1.1% range for the next three years, pointing out that for a bank of SBI’s scale these levels generate strong earnings power. Credit costs are expected to remain benign, supported by corporate deleveraging and system-wide improvements in repayment behaviour. JPMorgan positions SBI as a value opportunity where earnings momentum and balance-sheet stability intersect at a favourable valuation.
JPMorgan on Bank of Baroda: ‘Overweight’
Bank of Baroda is assigned a target price of Rs 340, which translates into an 18.6% upside. JPMorgan groups BOB within the broader PSU re-rating story, noting that the bank has delivered steady improvements in asset quality, with lower slippages and more predictable credit costs. Its gains in mortgage market share are tied to better processes and faster sanction timelines rather than promotional pricing.
The report highlights that BOB’s return profile has been stable and that its current valuation leaves room for expansion as investors warm to PSU banks with consistent profitability. The firm stops short of calling it a high-growth idea. It treats BOB as a disciplined operator whose valuation still does not reflect the improvements visible across the last several quarters.
JPMorgan on Punjab National Bank: ‘Overweight’
Punjab National Bank receives a target price of Rs 136, implying 11.3% upside. JPMorgan acknowledges the historical baggage that PNB continues to carry but points to clear signs of cleaner books and improving return metrics. Its projections show RoA moving toward the 0.8 to 0.9% band over the next three years, supported by a reduction in provisioning costs.
The report links the bank’s moderate recovery to expanding mortgage and MSME portfolios, arguing that the operating foundation is improving even if the transformation is not complete. JPMorgan views the upside as measured but justified by improving fundamentals.
JPMorgan on AU Small Finance Bank: ‘Overweight’
JPMorgan assigns AU Small Finance Bank a target price of Rs 1,126, which indicates a 26.4% upside, the highest in the entire report. The brokerage argues that AU is stepping into a phase of RoA expansion because credit costs have started falling at the same time that loan growth is showing renewed momentum. It places AU in what it describes as its “alpha generation” group, a category reserved for banks that offer meaningful outperformance potential relative to the sector.
The report highlights that AU’s profitability metrics remain strong for a lender of its size, and its ability to maintain credit discipline while expanding a diversified retail book gives it an operational advantage. JPMorgan connects the stock’s upside to both earnings gains and valuation expansion. As NIMs stabilise and growth accelerates, the firm expects AU’s price-to-book multiple to rise in step with improving performance visibility.
JPMorgan on IDFC First Bank: ‘Overweight’
IDFC First Bank is assigned a target price of Rs 100, implying a 24.3% upside. JPMorgan frames IDFC First as a restructuring story that has finally moved into a cleaner operating phase. Credit costs are falling, RoA is improving, and growth is picking up across retail and commercial segments rather than in isolated pockets.
The report notes that the bank’s steady deposit traction supports this turnaround and that the market has not fully re-rated the stock because investors are still anchored to its long transition period. JPMorgan expects the valuation to expand as the bank demonstrates the stability of its new earnings profile.
Banks with ‘Neutral’ rating by JP Morgan
However, there are some counters that JPMorgan is Neutral on but sees scope for future growth.
JPMorgan on HDFC Bank: ‘Neutral’
JPMorgan assigns HDFC Bank a target price of Rs 1,105, suggesting 11.6% upside. The brokerage observes that despite the bank’s operational strength, its loan-deposit ratio at 98% signals an imbalance that limits growth flexibility. Loan growth has been solid, but JPMorgan argues this cannot continue without stronger deposit mobilisation.
The report adds that RoA needs to show a sustained move toward the 2% level to justify a more constructive stance. The valuation gap with ICICI has narrowed, which reduces the relative case for rerating.
JPMorgan on Axis Bank: ‘Neutral’
Axis Bank receives a target price of Rs 1,370, pointing to a 10.3% upside. JPMorgan acknowledges the bank’s strong operating performance but emphasises that recurring provisioning one-offs continue to interfere with how investors perceive the bank’s stability. Even though slippage ratios have improved, the inconsistency in reported numbers prevents a clean re-rating.
The brokerage states that valuation support limits downside but that a decisive upside catalyst is missing until the bank delivers several noise-free quarters.
JPMorgan on Federal Bank: ‘Neutral’
Federal Bank carries a target price of Rs 251, implying 6.2% upside. JPMorgan recognises that the bank has strengthened its operating metrics over time, but the valuation already reflects the bulk of this progress.
The report suggests that the bank’s portfolio repositioning will add long-term resilience but may temper growth in the near term, which keeps the risk-reward equation balanced rather than compelling.
JPMorgan on Bandhan Bank: ‘Neutral’
Bandhan Bank is assigned a target price of Rs 152, resulting in a 1.7% downside. JPMorgan does not question Bandhan’s franchise strength but argues that its credit-cost cycle remains structurally volatile.
The report notes that while valuation limits the extent of downside, the absence of a convincing improvement in credit costs keeps the stock confined to a Neutral rating.
JPMorgan Underweight on select banks
There are some banks that JPMorgan is Underweight on. As per them, the structural gaps limit potential.
JPMorgan on IndusInd Bank: ‘Underweight’
IndusInd Bank receives a target price of Rs 735, which reflects a 13.3% downside. JPMorgan maintains a cautious stance because the bank’s returns remain muted and the path to a genuine turnaround is longer and less predictable than investors may expect.
The report acknowledges some operational improvement but reiterates that the structure of the bank’s business mix leaves it more exposed to economic cycles than peers. Until the return profile strengthens in a sustained manner, the brokerage believes the stock lacks the basis for re-rating.
JPMorgan on Yes Bank: ‘Underweight’
Yes Bank is assigned a target price of Rs 18, implying a 20% downside. The brokerage is direct in its assessment. It states that the bank does not offer clear RoA visibility, that profitability remains weak, and that the structural issues rooted in its earlier deterioration still shadow the institution.
JPMorgan views the valuation discount as appropriate rather than opportunistic, arguing that the bank lacks both earnings power and balance-sheet momentum to justify a more favourable rating.
This report arrives at a moment when banks remain priced with more caution than their numbers warrant. JPMorgan does not assign sweeping optimism to the sector. Instead, it separates the names that have visible RoA expansion, margin stability, and valuation comfort from those that do not. This separation, and the discipline with which it is applied, is what makes the report significant for investors who want clarity rather than slogans.
Overall, JPMorgan has listed out the key drivers and fundamental triggers dictating their investment rationale for these banking stocks.