Brokerages retain 'buy' on ICICI, HDFC, Axis Bank after Q2; margin recovery key
ICICI Bank led on core income growth, while Axis Bank posted the sharpest profit rise on a low base. HDFC Bank’s earnings remained weak, with margin recovery key to the outlook for all three lenders
Early Q2 results from HDFC Bank, ICICI Bank and Axis Bank have kept analysts positive about their growth outlook for the rest of FY27, despite pressure on margins. Brokerages have retained their ‘Buy’ ratings on all three lenders, with ICICI Bank emerging as the strongest performer on core income growth and profitability. So far this year, shares of ICICI Bank and Axis Bank have gained up to 4 percent, while HDFC Bank has declined 26 percent.
ICICI Bank has 53 ‘Buy’ ratings from brokerages, followed by Axis Bank with 49 and HDFC Bank with 47. Q2 scorecard: HDFC vs ICICI vs Axis Bank Among the three lenders, ICICI Bank reported the strongest growth in net interest income (NII), which rose 17.7 percent year-on-year in Q2. Axis Bank’s NII grew 11.8 percent, while HDFC Bank recorded 10 percent growth. However, Axis Bank reported the sharpest rise in net profit at 37.6 percent year-on-year, followed by ICICI Bank at 20.1 percent.
HDFC Bank’s profit grew just 4.7 percent, partly due to lower treasury gains. Axis Bank’s profit growth also benefited from a lower base, as the bank had made a one-time provision related to priority sector lending in the year-ago quarter. All three lenders reported lower net interest margins (NIMs), partly due to foreign currency deposits raised under the RBI’s FCNR(B) swap window. Axis Bank saw the sharpest year-on-year decline of 37 basis points.
The bank said FCNR deposits alone reduced its margin by 11 basis points; excluding this impact, its NIM would have been 3.47 percent. HDFC Bank’s NIM fell 14 basis points year-on-year, while ICICI Bank’s declined 12 basis points. Despite the pressure, analysts expect margins to improve in the coming quarters as banks deploy liquidity and the impact of higher funding costs eases. Sharad Avasthi, head of research (PCG) at SMIFS, said the results were better on most parameters.
He expects treasury losses to be largely reflected in Q2 and Q3, with performance potentially improving from Q4. ICICI Bank remains analysts’ top pick Nuvama retained its ‘Buy’ rating on ICICI Bank with a target price of Rs 1,850, citing strong credit growth even after excluding FCNR deposits. The brokerage expects growth to remain healthy and margins to recover from Q3 FY27. It sees return on assets (RoA) of 2.2–2.3 percent and return on equity (RoE) of around 17 percent over FY27–FY29.
Systematix also maintained its ‘Buy’ rating and raised its target price to Rs 1,750 from Rs 1,700. The brokerage said ICICI Bank’s Q2 profit of Rs 14,843 crore beat its estimates by 3.3 percent, while domestic NIM remained broadly stable. HDFC Bank needs a stronger earnings recovery Nuvama retained its ‘Buy’ rating on HDFC Bank with a target price of Rs 950, saying the quarter was broadly in line with expectations.
The bank’s credit growth remained healthy at 16 percent year-on-year, although earnings growth was modest. Management stability and a recovery in core earnings remain key concerns. Anup Bagchi is set to take over as managing director and chief executive. Elara Capital retained its ‘Buy’ rating with a target price of Rs 923, saying the new chief executive’s plans to improve margins and core earnings will be closely watched.
Elara added that HDFC Bank’s RoA of 1.7 percent and the slow recovery in margins remain challenges. While recent trends suggest the worst may be over, a sustained recovery is yet to take shape. Axis Bank bets on margin recovery Nuvama retained its ‘Buy’ rating on Axis Bank with a target price of Rs 1,650. The brokerage expects credit growth to remain strong and margins to recover from Q3 FY27 as the bank deploys available liquidity.
Improving margins and lower loan-loss provisions could support a gradual recovery in returns. However, investors will need to look beyond the strong headline profit growth and track whether the bank can sustain earnings momentum as the benefit of the lower base fades. HDFC Bank trades at 1.8 times its price-to-book (P/B) ratio, against its five-year average of 2.8 times. ICICI Bank trades at 2.6 times book value compared with its historical average of 3 times, while Axis Bank trades at 1.8 times against its five-year average of 2.02 times.
HDFC Bank’s valuation discount could offer scope for a recovery, but a sustained improvement in core earnings and margins will be key. ICICI Bank currently has the strongest growth profile, while Axis Bank’s outlook depends on margin recovery. For all three lenders, the key question is whether easing margin pressure can translate into stronger earnings over the rest of FY27.
