Following the conclusion of the Q4FY26 earnings season, JM Financial has published its comprehensive sector review for banks. The brokerage has outlined its preferred names and those warranting caution across its coverage universe, providing clear 'Buy', 'Add', 'Reduce', and 'Sell' recommendations.
Overall, JM Financial noted that the banking sector concluded FY26 with robust loan growth and resilient earnings, maintaining a positive outlook for FY27. However, the firm cautioned that rising interest rates could negatively impact deposit mobilization and rates. Additionally, recent macroeconomic issues might affect asset quality in specific sub-segments, which requires close monitoring.
Top 'Buy' Recommendations
In the private banking space, ICICI Bank Ltd and Axis Bank Ltd stand out as top-tier 'Buy' recommendations. They are joined by City Union Bank Ltd (CUBK) and DCB Bank Ltd. Among public sector banks, State Bank of India (SBI) is the sole recipient of a 'Buy' rating. For the Small Finance Bank (SFB) category, Ujjivan Small Finance Bank was highlighted as a preferred pick.
'Add' Ratings for Key Lenders
JM Financial has assigned an 'Add' rating to several prominent lenders. This includes private sector giants like HDFC Bank Ltd, Kotak Mahindra Bank Ltd, IndusInd Bank Ltd, and Bandhan Bank Ltd. In the public sector, Bank of Baroda (BoB) received an 'Add' recommendation, alongside AU Small Finance Bank Ltd in the SFB segment.
'Reduce' and 'Sell' Calls
Taking a more cautious stance, JM Financial issued 'Reduce' ratings for Federal Bank Ltd, Equitas Small Finance Bank Ltd, and public sector lender Punjab National Bank (PNB). Significantly, YES Bank Ltd was the only stock to receive an outright 'Sell' recommendation from the brokerage following its Q4 performance.
The brokerage emphasized that banks with strong liability franchises, diversified loan portfolios, and robust asset quality are best positioned to deliver superior performance in the current environment.