Why BofA Recommends Buying Shares of HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank

Over the last three months, the stock prices of Kotak Mahindra Bank, ICICI Bank, Axis Bank, and HDFC Bank have increased between 1% and 20%.

BofA Securities has given a ‘buy’ rating to these four leading private banks, citing strong earnings growth and attractive stock valuations.

Analysts believe that these major private banks will continue to perform well through the April-June quarter of the fiscal year 2025 (Q1FY25). They expect earnings to support net interest margins and maintain strong credit flow, ensuring a stable outlook.

“The current risk-reward scenario favors large-cap private banks in the short term. The recent rise in HDFC Bank’s stock is due to stabilized expectations and positioning. Additionally, there is growing confidence in the FY25 earnings per share (EPS) for ICICI Bank, Axis Bank, and Kotak Mahindra Bank,” stated BofA Securities.

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Analysts predict that EPS upgrades for public sector banks (PSBs) will resume from the second quarter of FY25 onwards. “We maintain a positive outlook on PSBs but do not see Q1FY25 as a significant catalyst for their stocks,” the brokerage note added.

Analysts also see a balanced risk-reward situation for mid-sized banks.

In the past three months, shares of Kotak Mahindra Bank, ICICI Bank, Axis Bank, and HDFC Bank have surged between 1% and 20%, compared to a 10% rise in the benchmark Nifty 50 index during the same period.

Previously, global ratings agency Moody’s also issued a favorable note, stating that Indian banks are expected to register 12-14% credit growth over the next 12-15 months as demand continues to revive.

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“Banks are well-positioned to take advantage of the country’s strong economic prospects through lending growth in sectors such as infrastructure, energy transition, manufacturing, small businesses, and retail,” Moody’s recently said.

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