India’s banking sector has closed the financial year with strong headline numbers, prompting Nomura to retain ‘Buy’ ratings on several large lenders even as it warns that part of the deposit growth may not sustain.
The brokerage points to a robust loan growth across most banks and a visible spike in deposits at the end of the quarter, while cautioning that the divergence between end-period and average deposit growth suggests a year-end push rather than a lasting trend.
Despite this, Nomura continues to back select banks where balance sheets remain steady and growth visibility holds.
Nomura on HDFC Bank: ‘Buy’
Nomura has retained its ‘Buy’ rating on HDFC Bank, even as the lender’s loan growth lags the broader industry. Advances grew around 12% year on year, while deposit growth came in stronger at the end of the quarter, helping ease balance sheet pressure. The bank reported a sharp pickup in deposits on a sequential basis, driven by both current account and savings account balances and term deposits. This led to a decline in the loan-to-deposit ratio to 95.3%, which the brokerage sees as a positive from a funding perspective.
“Deposit growth (EOP) was strong during the quarter at 8.6% QoQ/14.4% YoY, driven by 10.4% QoQ (12.3% YoY) growth in CASA deposits and 7.7% QoQ (15.5% YoY) growth in term deposits,” Nomura says.
At the same time, Nomura notes that the improvement is more visible in end-period numbers than in averages, which suggests that the deposit momentum may not yet be fully embedded. Average deposit growth stood lower, with current account and savings account balances seeing muted traction compared to term deposits. Even so, the brokerage remains positive given the bank’s ability to strengthen its liability franchise and maintain steady asset growth.
Nomura on Axis Bank: ‘Buy’
Axis Bank remains among Nomura’s stronger picks, with the brokerage reiterating its ‘Buy’ rating following a quarter of robust growth across both loans and deposits. Advances rose 18.4% year on year, outpacing industry trends, while deposits grew 13.9%, supported by gains in both current account and savings account balances and term deposits.
“Loans grew at a robust pace 6.3% QoQ(+18.4% YoY), improving further from 3QFY26 levels and faster than industry growth,” Nomura adds.
The brokerage notes that Axis Bank has managed to sustain strong credit growth while also improving its funding mix, with the current account and savings account ratio inching up to 39.6%. Deposit growth has kept pace with advances, allowing the bank to maintain a stable credit-to-deposit ratio. Nomura sees this as a sign of consistent execution, with the bank well placed to carry forward momentum into the next financial year.
Nomura on Kotak Mahindra Bank: ‘Buy’
Nomura has maintained a ‘Buy’ rating on Kotak Mahindra Bank, although it points out that loan growth has been relatively softer compared to peers. Advances rose 16.2% year on year, while deposit growth remained healthy at 14.7%. The bank continues to benefit from a strong current account and savings account franchise, with the ratio improving to 43.3%.
“Net advances (period-end) growth was healthy but soft compared to peers at 16.2% YoY/3.2% QoQ,” Nomura further adds.
The brokerage highlights that while end-period current account and savings account balances saw a sharp rise, average balances remained more muted. This again points to the broader trend seen across the sector, where deposit growth appears stronger at the close of the quarter. Even so, Kotak’s strong liability profile and lower loan-to-deposit ratio of 86.6% provide comfort, keeping Nomura constructive on the stock.
Nomura on IndusInd Bank: ‘Buy’
IndusInd Bank continues to carry a ‘Buy’ rating from Nomura despite a decline in its loan book on a year-on-year (YoY) basis. Advances fell 8.7%, although the pace of decline has moderated compared to the previous quarter. Deposit growth remained subdued, with a modest sequential increase led by retail deposits.
“IIB’s loans declined 0.8% QoQ (-8.7% YoY); however the pace of decline had moderated compared to 3QFY26… Deposit growth was muted at +1.6% QoQ,” Nomura explains.
The brokerage notes that the bank has seen some improvement in its deposit mix, with retail deposits gaining share and the current account and savings account ratio improving to 31.3%. While challenges remain, Nomura appears to be factoring in a gradual recovery as the pace of contraction slows and funding stabilises.
Nomura on IDFC First Bank: ‘Buy’
Nomura has reiterated its ‘Buy’ rating on IDFC First Bank, supported by strong loan growth of 20% year on year. However, deposit growth remained largely flat on a sequential basis, impacted by multiple headwinds including rate cuts and operational disruptions.
“Customer deposits were flat at 0.6% QoQ (+17.2% YoY) due to multiple headwinds… The press release indicated that the asset quality of the MFI book had returned to normalcy and that in the rest of book continued to be stable as before,” Nomura adds.
The brokerage highlights that despite near-term pressure on deposits, the bank’s asset quality remains stable and loan growth continues to hold up. Average current account and savings account ratios have improved, indicating some resilience in the liability franchise. Nomura sees the current phase as temporary, with potential for recovery once disruptions ease.
Nomura on Bank of Baroda: ‘Buy’
Bank of Baroda is another stock where Nomura has retained a ‘Buy’ rating, citing strong growth across both advances and deposits. Loans grew 16.2% year on year, led by domestic retail segments, while deposit growth improved to 12%.
“The bank’s overall loan growth in the quarter was robust at 16.2%/6.3% YoY/QoQ… Deposit growth improved to 12.0%/6.6% YoY/QoQ,” Nomura says.
Nomura notes that both domestic and overseas businesses contributed to growth, with domestic deposits and advances showing steady expansion. Retail lending continues to be a key driver, and the loan to deposit ratio remains comfortable. The brokerage remains positive on the bank’s steady performance and improving mix.
Conclusion
Nomura’s latest sector note points to a banking system that has delivered strong headline numbers at the close of the financial year, with most lenders reporting healthy credit growth and a visible jump in deposits at the end of the quarter. At the same time, the brokerage cautions that the gap between end-period and average deposit growth suggests that part of the momentum may be linked to year-end factors rather than a sustained trend.
Disclaimer: This report contains third-party brokerage ratings and financial analysis which should not be construed as a direct offer or solicitation to buy or sell any securities. Given the volatility of equity markets and the specific nature of banking sector valuations, readers are advised to consult with a SEBI-registered investment advisor before making any financial decisions. The mentioned price targets and ratings are based on prevailing market conditions and are subject to change without notice.
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