Goldman Sachs Banking Picks : Banking Sector Update

Goldman Sachs has initiated coverage on 14 Indian banks, and its strongest preferences are

and Kotak Mahindra Bank, as it expects a cyclical recovery in banking earnings. Top Picks ICICI Bank: Buy | Target ₹1,935 | 37% upside Kotak Mahindra Bank: Buy | Target ₹509 | 31% upside HDFC Bank: ₹861 | 19% upside Axis Bank: ₹1,477 | 19% upside Federal Bank: ₹425 | 19% upside AU Small Finance Bank: ₹1,270 | 18% upside Why Is Goldman Bullish? The brokerage expects private banks to outperform PSU banks over the next two years, supported by: Stronger loan growth Improving liquidity Recovery in NIMs Benign asset quality Recovery in unsecured lending Goldman expects system credit growth to remain around 14–15% through FY26–FY29E, while NIMs could bottom out over the next two quarters before gradually recovering. My View The interesting part is the sector rotation Goldman is anticipating. If loan growth accelerates while NIMs recover and asset-quality concerns remain contained, private banks could see another phase of earnings growth and potential rerating. But valuations already reflect a significant part of the recovery in some mid-sized private banks, so sustained ROE improvement will be critical.