Leading brokerages Nomura India and Motilal Oswal Financial Services Ltd (MOFSL) have issued their outlook and stock ratings for major banking and financial institutions following their Q1FY26 business updates.
Bank of Baroda (BoB) was flagged by Nomura for weak loan and deposit growth, coupled with margin compression. While weak core PPOP is expected, treasury gains may offer a cushion. Nomura maintained a ‘Neutral’ stance.
AU Small Finance Bank (SFB) received a positive view from MOFSL for robust growth in advances and deposits, maintaining its momentum despite a high base. CASA and the CD ratio remained stable, prompting a ‘Buy’ call.
Bandhan Bank faced headwinds due to a significant drop in its microfinance book. Nomura expects muted Q1 performance due to margin pressure and elevated credit costs, reaffirming its ‘Neutral’ view.
Bajaj Finance showed strong growth in new loans and customer acquisitions, though deposit growth was muted due to a strategic shift. MOFSL issued a ‘Neutral’ rating.
L&T Finance was viewed positively with rising retail disbursements, especially in urban and SME segments. MOFSL maintained a ‘Buy’ rating, citing continued focus on retail lending.
Nomura and MOFSL released their assessments of key financial sector players after the June quarter updates.
For Bank of Baroda, Nomura highlighted weak growth trends in both loans and deposits. With expected margin contraction and soft fee income, core PPOP may disappoint. However, treasury income may partially offset the impact.
AU Small Finance Bank showed strong quarterly and yearly growth in both loan book and deposits, according to MOFSL. The consistent CASA and CD ratios support MOFSL’s continued positive outlook.
Bandhan Bank saw loan contraction driven by a shrinking microfinance portfolio. Nomura expects Q1 margins to decline, with soft fee income and high credit costs keeping returns subdued.
Bajaj Finance continues expanding its customer base and new loan bookings, but deposits grew marginally. MOFSL suspects a shift in funding strategy, and maintained a ‘Neutral’ rating.
L&T Finance impressed MOFSL with growing retail disbursements across most categories, especially in SME and Urban Finance, despite rural softness. With a 98% retail loan mix, MOFSL remains bullish on the stock.
These updates offer investors a balanced view of current business performance and future prospects in India's financial services sector
