Shares of several prominent Indian banks, including YES Bank, AU Small Finance Bank (AUSFB), Punjab National Bank (PNB), and HDFC Bank Ltd, climbed up to 3 per cent in Monday's trading session following the release of their September quarter (Q2) business updates. This positive sentiment extended across the Nifty Bank index, with all 14 constituents recording gains amidst expectations of strong upcoming quarterly results.
Key Performance Highlights from Q2 Updates
YES Bank advanced 1.88 per cent to Rs 21.09. The bank reported a significant 19.5 per cent year-on-year (YoY) growth in deposits, reaching Rs 3,54,084 crore in Q2. Loans and advances also saw a robust jump of 23.5 per cent YoY, totaling Rs 3,09,675 crore.
AU Small Finance Bank recorded a 3.02 per cent increase, with its shares trading at Rs 1,016.80. Analyst firm Jefferies noted that AUSFB's Asset Under Management (AUM) growth improved to 25 per cent YoY, up from 23 per cent in Q1. This surge was attributed to an improving credit cycle and broad-based growth in vehicle loans, surpassing Jefferies' FY27 expectation of 22 per cent. Deposit growth accelerated to 29 per cent YoY, and CASA (Current Account Savings Account) growth also improved to 29 per cent YoY. Jefferies reiterated AUSFB as a top pick, citing its higher growth, improving profitability, and benefits from the universal bank transition.
Punjab National Bank (PNB) gained 3.29 per cent, reaching Rs 113.17. PNB announced that its Q2 domestic and global advances grew by 14.80 per cent and 12.59 per cent, respectively. Global and domestic deposits also saw healthy increases of 9.90 per cent and 9.44 per cent, respectively.
HDFC Bank, which recently announced the appointment of its new MD & CEO, also saw its shares rise by 1.87 per cent. For the September quarter, HDFC Bank reported a 16 per cent growth in loans, 19 per cent in deposits, and 11 per cent in CASA. These figures represent an acceleration compared to the June quarter's 15 per cent loan and deposit growth and 9 per cent CASA growth. Jefferies highlighted a boost from $11.5 billion in FCNR-B deposits and maintained a 'Buy' rating, anticipating a continued focus on transition under the new CEO, Mr. Anup Bagchi.
Analyst Outlook and Top Picks
Ahead of the full Q2 earnings season, leading financial institutions have shared their top picks within the banking sector:
- Nomura favors HDFC Bank, Kotak Mahindra Bank, and ICICI Bank among large banks, while recommending IDFC First Bank and IndusInd Bank in the mid-tier segment.
- MOFSL (Motilal Oswal Financial Services) identified ICICI Bank, State Bank of India, Kotak Mahindra Bank (KMB), and AUSFB as its top banking picks.
MOFSL estimates that Net Interest Income (NII) growth for its banking coverage will improve by 11.9 per cent YoY (or 2.2 per cent QoQ) for Q2. Pre-provision operating profit (PPoP) is projected to rise by 4.1 per cent QoQ. The firm anticipates private banks' Profit After Tax (PAT) to grow by 24 per cent YoY and PSU banks' PAT to grow by 27 per cent YoY. Overall, MOFSL projects a 25.4 per cent YoY and 9.5 per cent QoQ PAT growth for its coverage universe, forecasting a 15 per cent earnings CAGR over FY26-28, with private banks leading at a 20 per cent CAGR.