Select private sector banks in focus; IDFC First, RBL, AU SFB rally upto 6%

Analysts on private banks: Overall, asset quality outlook is stable to positive, except for the unsecured retail loans and MFI segment; but it appears that stress in unsecured segment has peaked out.

Mid-, small-cap private bank stocks in focus

Shares price of mid and small-sized private sector banks were in focus and rallied up to 6 per cent on the BSE in Tuesday’s intra-day trade in an otherwise range-bound market.

 

IDFC First Bank, City Union Bank (CUB), RBL Bank, AU Small Finance Bank (SFB), Karur Vysya Bank, Federal Bank, ESAF Small Finance Bank, Equitas Small Finance Bank, CSB Bank, DCB Bank and South Indian Bank were up in the range of 2 per cent to 6 per cent. In comparison, the BSE Sensex was up 0.06 per cent at 83,654 at 01:47 PM.

 

Of these, CSB Bank (up 4 per cent at ₹408.65), CUB (4 per cent at ₹228.50), AU SFB (3 per cent at ₹837.50), Karur Vysya Bank (3 per cent at ₹276.45), Federal Bank (2 per cent at ₹217.95) and South Indian Bank (2 per cent at ₹31.60) hit their respective 52-week highs in intra-day trade today.  CATCH STOCK MARKET LATEST UPDATES TODAY LIVE

Why did IDFC First Bank rally today?

   

Among individual stocks, IDFC First Bank rallied 6 per cent to ₹76.98 on the back of a seven-fold jump in average trading volumes. A combined 101.5 million shares changed hands on the NSE and BSE. The stock was trading close to its 52-week high of ₹82.18, which it touched on July 1, 2024.

 

According to media reports, Investec has upgraded its rating on the IDFC First Bank to "buy" and has raised its price target to ₹90 per share on healthy earnings outlook.

 

Meanwhile, going forward, the overall earnings profile of IDFC First Bank is expected to improve with the increasing scale of operations and improving cost metrics along with the expected reduction in credit costs. However, the stress in the microfinance institution (MFI) segment on account of the deterioration in credit discipline, overleveraging of borrowers in the MFI sector and the impact of economic shocks/disruptions on the asset quality will remain monitorable, ICRA said in its May month rating rationale.

 

Slower-than-expected transmission of deposit rate cuts, discretionary expenditure to expand the customer franchise and the impact of regulatory changes, like the implementation of expected credit loss (ECL), on profitability will also remain monitorable. ICRA expects the profitability to remain moderate in H1FY2026, though the same is expected to witness steady quarterly improvement trend in H2FY2026.

CUB hit new 52-week high

 

Shares of CUB hit a 52-week high of ₹228.50, gaining 4 per cent on the BSE in intra-day trade on the back of a six-fold jump in average trading volumes. The bank’s management remains confident that asset quality improvement will continue, led by controlled slippages and healthy recoveries. The pace of recoveries is expected to outpace slippages even in FY26. 

 

Meanwhile, as per the Reserve Bank of India’s (RBI’s) sectoral deployment data for the fortnight ended May 30, 2025, bank credit growth slowed to 9.8 per cent year-on-year (YoY) as of May 30, 2025, down from 16.2 per cent a year ago, driven by sharp moderation in unsecured personal loans, credit card dues, vehicle loans, and credit to NBFCs.

 

Bank credit growth is losing steam, with broad-based deceleration across retail, NBFCs, and agriculture. Unsecured personal loans and credit card spends have notably slowed, reflecting cautious lending and weak demand. With deposit mobilisation challenges persisting, credit growth in FY26 is likely to remain at 11-13 per cent, with recovery expected in H2FY26, ICICI Securities said in a note.

 

Overall, asset quality outlook is stable to positive for the sector, except for the unsecured retail loans and MFI segment but it appears that stress in the unsecured segment has also broadly peaked out. Mirae Asset Sharekhan believes banks with a robust capital base, strong asset quality, and healthy retail deposit franchises are well-placed to capture growth opportunities.