Motilal Oswal’s latest banking sector update points to rising loan yields, cooling deposit costs and steady credit demand. The brokerage has recommended Buy on four banking sector stocks. While the report does not include target prices or upside %, the earnings outlook across these names remains strong.
Here is what the brokerage says about each bank.
Motilal Oswal on ICICI Bank: ‘Buy’
Motilal Oswal has kept a Buy rating on ICICI Bank. The bank has one of the highest shares of repo-linked and EBLR loans in the sector at 55%, which helps capture improvements in fresh lending rates.
The report notes healthy earnings traction. ICICI Bank’s profit is estimated to rise 14% in FY27 and 16% in FY28, supported by stable margins and controlled credit costs. Asset quality remains strong and provisioning coverage stays comfortable.
The brokerage expects the bank to benefit from easing term deposit rates and rising loan yields through FY26 and FY27.
Motilal Oswal on HDFC Bank: ‘Buy’
HDFC Bank stays on the Buy list of the brokerage. The bank has cut its one-year MCLR by 95 bps YoY, helping lower borrowing costs within its deposit franchise. PAT is expected to grow 11% in FY27 and 18% in FY28, driven by better liability mix, expanding credit demand and the full effect of the recent CRR reduction. Motilal Oswal notes that funding costs across the system are easing, which adds support for HDFC Bank’s margin outlook over the next two years.
Motilal Oswal on SBI: ‘Buy’
State Bank of India remains a Buy on the list of the brokerage. SBI has cut its MCLR by only 20 to 40 bps YoY, which helps protect spreads even as deposit rates move lower.
The brokerage expects PAT growth of 7% in FY27 and 12% in FY28, backed by loan growth, steady recoveries and softening credit provisions.
According to the report, SBI’s blended funding cost is easing in line with the system, supporting the earnings profile across FY27 and FY28.
Motilal Oswal on AU Small Finance Bank: ‘Buy’
AU Small Finance Bank is the fourth Buy pick of the brokerage. The bank reported a NIM of 5.50% in 2QFY26, one of the best levels in the sector, supported by its retail-heavy book. Motilal Oswal estimates profit growth of 36% in FY27 and 32% in FY28, driven by higher operating leverage and rising loan volumes.
The bank continues to add branches and widen customer reach, which the brokerage sees as a long-term driver of earnings.