HDFC Bank, Axis Bank, Kotak among Nomura's top picks as Q1 loan growth stays resilient

Nomura said loan growth momentum remained intact for Indian banks in the June quarter, with HDFC Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank and IDFC First Bank reporting healthy business updates despite widening differences in growth across lenders.

The brokerage reviewed provisional Q1FY27 updates from HDFC Bank, Axis Bank, Kotak Mahindra Bank, AU Small Finance Bank, IndusInd Bank, IDFC First Bank, Bandhan Bank and Yes Bank.

HDFC Bank reported one of the strongest performances, with gross loan growth of 3.4% quarter-on-quarter and 15.4% year-on-year. Average deposits rose 5.6% sequentially, led by term deposits, while the loan-to-deposit ratio increased to 96.5%.

Axis Bank's loan book grew 2.3% quarter-on-quarter and 18.8% year-on-year, while average deposits rose 6.4%. However, the brokerage noted that loan growth was "lowest among larger peers," with the CASA ratio declining to 36.9%.

Kotak Mahindra Bank reported loan growth of 3.3% quarter-on-quarter and 15.1% year-on-year, which Nomura described as "healthy but soft compared to peers." The bank's average CASA ratio fell 56 basis points sequentially to 38.8%.

Among mid-sized lenders, IDFC First Bank stood out with gross loan growth of 5.2% quarter-on-quarter and 20.6% year-on-year. Nomura said "deposit growth was back to pre-fraud incidence," while the CASA ratio improved by 100 basis points to 50.8%.

IndusInd Bank also returned to sequential loan growth after five quarters, with advances rising 3.3% quarter-on-quarter, although CASA deposits continued to weaken.

Bandhan Bank reported loan growth of 0.8% sequentially, while deposits declined 0.9% as the lender continued to reduce bulk deposits. Collection efficiency in its microfinance portfolio remained stable at 98.9%.

Nomura maintained 'Buy' ratings on HDFC Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank and IDFC First Bank, while retaining 'Neutral' on AU Small Finance Bank, Bandhan Bank and Yes Bank. The brokerage said the latest updates indicate that loan growth remains resilient, although the divergence is now becoming more evident within peer groups rather than simply between private and public sector banks.