Banking sector stocks are in focus after the Q2 updates and ahead of the second-quarter results. Nomura has identified three key banking stocks- IndusInd Bank, Bank of Baroda, and Kotak Mahindra Bank. They have a Buy rating on one and Neutral on the other two. The brokerage house highlighted mixed trends in loan and deposit growth for Q2 FY26 and sees as much as 29% upside in one of the stocks. Read to know what’s driving this divergence.
Nomura on IndusInd Bank
Nomura stated that IndusInd Bank reported weak loan growth and deposit growth in its pre-quarterly update of Q2 FY26. Despite that, the brokerage has maintained its ‘Buy’ call on the banking sector stock, with a target price of Rs 960. This implies an upside of 29%.
The brokerage firm will await further details from the Q2 FY26 results. “With the new CEO, Rajiv Anand, at the helm, the management commentary on strategy, risk controls, and glide path for the bank will be critical to watch out for in Q2 FY26,” said Nomura.
The bank’s loan growth was weak, dropping 8.3% YoY and 1.9% sequentially. Its deposits declined 5.5% YoY and 1.8% QoQ. The bank’s retail deposit growth was muted at 1.5% YoY, while bulk deposits declined by 11% YoY. Its CASA deposits declined 18.9% YoY, and the CASA ratio declined by 510 basis points YoY. The bank’s loan-to-deposit ratio (LDR) was stable sequentially at 84%.
Nomura on Bank of Baroda
Nomura said that Bank of Baroda has reported a strong loan growth in the pre-quarter update of Q2 FY26. The growth trends in both loans and deposits improved in the second quarter for the lender compared to the previous quarter. “We expect NIMs and commentary on growth outlook to remain key monitorables for the stock going into Q2 FY26 results,” said the brokerage house.
The bank’s overall loan growth in the quarter was strong at 12% YoY and 4% QoQ, led by growth in overseas advances, which rose 14% YoY and 11% QoQ. The bank’s domestic advances grew by 11.5% YoY and 2.5% QoQ. The domestic retail advances witnessed strong growth of 17.6% YoY and 6.4% QoQ.
Deposit growth was steady at 9.3% YoY, led by 9.7% YoY growth in domestic deposits, while overseas deposits grew by 7.2% YoY. Bank of Baroda’s domestic loan-to-deposit ratio (based on gross loans) increased by 200 basis points YoY to 85.3%.
Nomura has maintained its Neutral call on the banking stock, with a target price of Rs 240, implying a downside of 9%.
Nomura on Kotak Mahindra Bank
Nomura maintained its Neutral rating on Kotak Mahindra Bank, with a target price of Rs 2,150, an upside of mere 2.3%. The bank has reported strong loan and deposit growth numbers in its pre-quarterly update. “We expect the focus to remain on credit cost and NIMs trajectory in Q2 and commentary on their outlook,” said the brokerage firm.
The bank’s net advances growth was strong at 15.8% YoY. The total deposits registered a healthy growth of 14.6% YoY. The bank’s CASA deposits witnessed strong growth of 11.2% YoY, and the CASA ratio improved by 144 basis points sequentially to 42.3%. The loan-to-deposit ratio increased by 70 bps QoQ to 87.5%.