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CLSA Backs HDFC Bank, ICICI Bank With Big Price Targets
Global brokerage CLSA has initiated coverage on HDFC Bank and ICICI Bank with an 'Outperform' rating, projecting considerable returns over the next 12 months. CLSA has set a price target of ₹1,200 for HDFC Bank, implying a 41% potential upside, and ₹1,700 for ICICI Bank, suggesting a 29% gain. The firm anticipates both lenders could deliver returns exceeding 25% within the next year.
Stock Prices Lag Analyst Optimism
This optimism from CLSA contrasts sharply with how the banks' stocks have performed recently. Both HDFC Bank and ICICI Bank have fallen between 5% and 15% this year. On Tuesday, March 10, 2026, HDFC Bank closed up 0.99% at ₹849.10 with about 1.37 crore shares traded. ICICI Bank closed higher by 2.69% at ₹1,312.80, seeing over 34.7 lakh shares change hands. Despite these gains, HDFC Bank is trading near its 52-week low and below key technical averages. ICICI Bank's momentum has also been weak on weekly and monthly charts.
Why CLSA Is Bullish: Growth and Valuation Factors
CLSA expects HDFC Bank's core profit before provisions (PPOP) to grow at an average annual rate of 18% from FY2026 to FY2028, up from 12% previously. The firm also believes investors will stop focusing on the loan-to-deposit ratio, which the Reserve Bank of India is no longer emphasizing. HDFC Bank trades at about 1.8 times its book value. Its price-to-earnings (P/E) ratio has varied widely from 16.88x to 35.59x depending on the period. For ICICI Bank, CLSA foresees retail loan growth accelerating beyond its current 7% annual pace, boosting overall lending. The bank's consistently low bad loan rates (net slippage) have been overlooked and could lead to lower credit costs than expected. ICICI Bank trades at around two times book value, with P/E ratios typically between 17x and 19x. Most analysts are very positive on ICICI Bank, with 48 out of 50 recommending 'Buy'. Recent comments also note stability with Sandeep Bakhshi's extended term and steady net interest margins. The Indian banking sector as a whole is expected to grow credit by 10-15% in FY27, supported by economic strength. Banks start 2026 in good shape, with bad loans (Gross NPAs) falling to 2.2% in Q1 FY26. However, new rules for digital banking and global capital standards are coming into effect from January 2026.
Challenges Ahead: Valuation, Techs, and Rules
However, challenges remain. HDFC Bank's P/E ratio, reaching up to 35.59x, looks high compared to peers and the industry average of 11-12x. ICICI Bank's P/E is more reasonable but still above the average. Technical signals for HDFC Bank show weakness, with the stock below key averages and near its 52-week low. ICICI Bank's technical momentum is also subdued. Additionally, new regulations set to take effect in early 2026, such as stricter digital banking rules and group restrictions, could create compliance hurdles. Competition in getting deposits and in retail lending is also fierce, potentially squeezing profits.
Analyst View Remains Positive
Most analysts remain optimistic about HDFC Bank and ICICI Bank. CLSA's price targets point to substantial potential gains from expected profit and loan growth. Faster profit growth is a key driver for HDFC Bank, while ICICI Bank benefits from its strong retail lending outlook and good asset quality. The overall banking sector is expected to perform well, with credit growth likely. However, investors should watch how new regulations and competition affect these major banks.