Private banking stocks gain on strong Q1 earnings, Goldman bullish

Most private banking stocks have rallied this month after strong Q1 earnings, with Karnataka Bank surging over 15% and DCB Bank, AU Small Bank, and City Union Bank gaining 1-9%. However, ICICI Bank and HDFC Bank fell 1% and 3% respectively this month on profit booking.

Livemint reports experts see the sector as an attractive risk-reward bet, citing double-digit credit growth, benign asset quality, returning foreign investment, and the RBI's rate pause. Some caution that net interest margin compression may persist another quarter or two. Business Today reports Goldman Sachs expects private banks to outperform PSU banks over two years, driven by strong loan economics and liquidity gains, with ICICI Bank and Kotak Bank as top picks.

Goldman Sachs set target prices of Rs 1,935 for ICICI Bank and Rs 509 for Kotak Bank, implying 37% and 31% upside respectively. It warned PSU banks may face headwinds from higher credit costs under the new ECL framework and rising employee expenses from the 2027 wage revision.