Goldman Sachs Picks ICICI Bank and Kotak Mahindra Bank as Top Indian Banking Bets

Goldman Sachs has initiated coverage on 14 Indian banks, naming ICICI Bank and Kotak Mahindra Bank as its top picks. The brokerage expects a cyclical earnings recovery in the banking sector, driven by healthy loan growth, improving liquidity, recovering net interest margins (NIMs), and benign asset quality.

Goldman Sachs initiated Buy ratings on ICICI Bank with a target price of ₹1,935, implying 37% upside, and Kotak Mahindra Bank at ₹509, implying 31% upside. The brokerage also initiated HDFC Bank at ₹861, Axis Bank at ₹1,477, Federal Bank at ₹425, and AU Small Finance Bank at ₹1,270.

The earnings recovery at mid-sized private banks is already reflected in valuations, according to Goldman Sachs, which means further re-rating would require sustained RoEs above the cost of equity. The brokerage expects private banks to outperform state-owned banks over the next two years due to loan growth, NIMs, and asset quality.