Private sector banks, with their robust risk management and digital capabilities, are poised for a strong recovery in 2025. As interest rates stabilise and credit growth picks up, these institutions will likely benefit from improved asset quality and rising consumer confidence. This presents a compelling opportunity for investors seeking exposure to India’s financial sector transformation.
Bernstein suggests that private sector banks, including HDFC Bank, Axis Bank, IndusInd Bank, and ICICI Bank, are better investment options than public sector banks due to stronger deposit growth and fewer asset quality issues. With excess liquidity in PSU banks dissipating and weaker loan growth ahead, private banks, particularly larger ones, are expected to outperform.
HDFC Bank is Bernstein’s top pick, followed by IndusInd Bank, Axis Bank, and ICICI Bank. Analysts predict banks return on assets (ROA) will bottom out by June 2025, supported by anticipated RBI rate cuts in the first half of the year.
Following is a list of fundamentally strong bank stocks:
1. HDFC Bank
HDFC Bank, headquartered in Mumbai, is India’s largest private sector bank by assets. Established in 1994, it offers personal and corporate banking, loans, and investment solutions. With a strong international presence in Bahrain and the UAE, it has an extensive network across India.
In Q2 FY25, the Net Interest Income (NII) rose by 10% year-on-year to Rs. 30,110 crore, compared to Rs. 27,380 crore in Q2 FY24. The Net Interest Margin (NIM) stood at 3.46%, while the Net Non-Performing Assets (Net NPA) ratio was 0.4%. Deposits increased by 15% YoY to Rs. 25,00,100 crore from Rs. 21,72,900 crore in Q2 FY24. The Capital Adequacy Ratio (CAR) was robust at 19.8%.
The current market price is Rs. 1,669.50, reflecting a decrease of 1.45% today. Over the past six months, the price has risen by 2.02%, and over the last year, it has gained 1.11%.
2. Axis Bank
Axis Bank, founded in 1993, is a leading private sector bank in India. It provides a variety of financial products, including retail and corporate banking services. The bank focuses on digital innovation to enhance the customer experience, ensuring seamless and efficient banking services.
In Q2 FY25, the Net Interest Income (NII) grew by 9% year-on-year to Rs. 13,483 crore, up from Rs. 12,269 crore in Q2 FY24. The Net Interest Margin (NIM) was 3.99%, and the Net Non-Performing Assets (Net NPA) ratio declined by 2 basis points YoY to 0.34%. Deposits increased by 13.7% YoY to Rs. 10,86,744 crore from Rs. 9,55,556 crore in Q2 FY24. The Capital Adequacy Ratio (CAR) stood at 16.61%.
The current market price is Rs. 1,057.75, reflecting a decrease of 1.60% today. Over the past six months, the price has fallen by 18%, and over the last year, it has declined by 5.38%.
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3. IndusInd Bank
IndusInd Bank, established in 1994, serves over 38 million customers with a comprehensive range of banking services. It operates more than 3,000 branches across India and maintains international offices in Dubai and London, showcasing its growing global presence.
In Q2 FY25, the Net Interest Income (NII) increased by 5% year-on-year to Rs. 5,347 crore, compared to Rs. 5,079 crore in Q2 FY24. The Net Interest Margin (NIM) stood at 4.08%, and the Net Non-Performing Assets (Net NPA) ratio was 0.64%. Deposits grew by 15% YoY to Rs. 4,12,397 crore from Rs. 3,50,537 crore in Q2 FY24. The Capital Adequacy Ratio (CAR) was 16.51%.
The current market price is RS. 975, reflecting a decrease of 0.61% today. Over the past six months, the price has fallen by 32.05%, and over the last year, it has declined by 40%.
4. ICICI Bank
ICICI Bank, founded in 1994, is a prominent private sector bank in India. It offers a wide range of financial services, including retail and corporate banking, along with wealth management. The bank has significantly advanced its digital banking capabilities to meet modern customer needs.
In Q2 FY25, the Net Interest Income (NII) rose by 8.5% year-on-year to Rs. 20,048 crore, compared to Rs. 18,308 crore in Q2 FY24. The Net Interest Margin (NIM) was 4.27%, and the Net Non-Performing Assets (Net NPA) ratio stood at 0.42%. Deposits increased by 15.6% YoY to Rs. 14,97,761 crore from Rs. 12,94,742 crore in Q2 FY24. The Capital Adequacy Ratio (CAR) stood at 15.35%.
The current market price is Rs. 1,251.30, reflecting a decrease of 1% today. Over the past six months, the price has risen by 0.3%, and over the last year, it has increased by 27.78%.
Fazal Ul Vahab C H
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