Nomura Selects Top Banks as Q1 Loan Growth Solidifies Resilience Amid Peer Divergence

Nomura Selects Top Banks as Q1 Loan Growth Solidifies Resilience Amid Peer Divergence​

Nomura has concluded that loan growth momentum remains intact for Indian banks during the June quarter. While many lenders reported healthy business updates, the brokerage noted widening differences in performance across peer groups. The analysis reviewed provisional Q1FY27 data from several major and mid-sized financial institutions.

Market Resilience and Divergence in Banking Sector​

The latest updates indicate that loan growth remains resilient within the sector. Crucially, Nomura points out that this divergence is now becoming more evident within individual peer groups, rather than simply between private and public sector banks. The brokerage maintained 'Buy' ratings on several key institutions while assigning 'Neutral' status to others based on their specific performance metrics.

Leaders in Growth: HDFC Bank and IDFC First Bank​

HDFC Bank reported one of the strongest performances among peers. Its gross loan growth clocked 3.4% quarter-on-quarter and registered a 15.4% increase year-on-year. The bank saw average deposits rise sequentially by 5.6%, driven primarily by term deposits, while its loan-to-deposit ratio improved to 96.5%.

IDFC First Bank stood out among mid-sized lenders. This institution reported gross loan growth of 5.2% quarter-on-quarter and a strong 20.6% year-on-year increase. Nomura noted that deposit growth at IDFC First Bank had returned to pre-fraud incidence levels, and the CASA ratio improved by 100 basis points to 50.8%.

Mid-Tier Banking Performance: Kotak and IndusInd Banks​

Kotak Mahindra Bank posted a healthy performance with loan growth at 3.3% quarter-on-quarter and 15.1% year-on-year. However, Nomura described the progress as "healthy but soft compared to peers." The bank's average CASA ratio saw a sequential dip of 56 basis points, settling at 38.8%.

IndusInd Bank successfully returned to sequential loan growth after five quarters. Advances increased by 3.3% quarter-on-quarter. Despite this positive movement in loans, the brokerage noted that CASA deposits continued to weaken for the lender.

Peer Performance and Areas of Caution​

Axis Bank saw its loan book grow 2.3% quarter-on-quarter and 18.8% year-on-year, with average deposits rising by 6.4%. However, Nomura pointed out that this growth was "lowest among larger peers," and the bank’s CASA ratio declined to 36.9%.

Bandhan Bank reported a sequential loan growth of 0.8%, while deposits decreased by 0.9% as the lender continued reducing bulk deposits. The microfinance portfolio collection efficiency at Bandhan remained stable at 98.9%.

Nomura's Rating Summary and Outlook​

Nomura maintained a 'Buy' rating on HDFC Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank, and IDFC First Bank. Conversely, the brokerage assigned a 'Neutral' rating to AU Small Finance Bank, Bandhan Bank, and Yes Bank. The consensus remains that while loan growth is resilient across the sector, performance metrics are showing clear differentiation between key financial institutions.