Budget 2025 : Stocks to watch in the banking sector 

Banking is the backbone of any economy and all eyes would be on key banking stocks as Finance Minister Nirmala Sitharaman presents the Union Budget on February 1.

In a recent report, Bajaj Broking stated that for non-banking financial companies (NBFCs), a reduction in the loan limit for enforcing the SARFAESI Act from Rs 2 million to Rs 1 million is anticipated. Additionally, credit guarantee schemes for the microfinance sector, similar to those available for SMEs, may be introduced, it added.

Here are the key banking stocks that could see action on Saturday.

HDFC Bank

The lender’s efforts to improve its loan-to-deposit ratio are showing positive results, and could reach around 87 percent by FY27, said Axis Securities in its report. It added that despite challenges in deposit mobilisation, especially in low-cost CASA deposits, the bank continues to drive strong growth in term deposits to build a stable customer base. It added that HDFC Bank stands out among its peers due to its strong asset quality, even as stress rises in the unsecured lending segment. Further, several factors support its growth like sufficient levers to improve net interest margins, controlled operating expenses, and strong asset quality ensuring minimal credit costs, the brokerage added.

Bank of Baroda

The bank will need to balance credit growth while maintaining a stable loan-to-deposit ratio, as there is limited room for significant improvement, said Axis Securities in a report. “As a result, its credit and deposit growth is expected to align with industry trends in FY25,” it said. Near-term margins may be impacted by regulatory changes. However, BoB’s focus on expanding its RAM portfolio, particularly in retail, should support margins over the medium term.

ICICI Bank

ICICI Bank's balance sheet remains well-protected, supported by strong excess provisioning and robust capitalisation, said BNP Baribas in a report. It also benefits from a high CASA ratio relative to net demand and time liabilities, giving it a funding cost advantage over competitors, which has enabled the bank to expand its loan market share in prime segments and solidify its position as a preferred choice among investors in the Indian banking sector.

“While some pressure is emerging in unsecured credit, the bank remains confident that its overall impact will be limited to a moderate increase in credit costs, expected to normalize at 10-15 basis points higher levels,” it added.

Bajaj Finance

Challenges persist in segments such as two-wheelers (2W), three-wheelers (3W), used cars, professional loans, and personal loans with multiple lenders and credit costs are projected to remain around 2.1 percent in FY25-26, said Elara Securities. It added that product diversification and an expanding customer base are driving growth, with operating leverage benefits also coming into play. As a result, Return on Assets (RoA) is expected to reach 4.6 percent while Return on Equity (RoE) is projected at 19-20 percent in FY26-27.