Goldman Sachs Banking Report: HDFC Bank and Federal Bank Recommended for Buy, Yes Bank Rated Sell

Global financial services firm Goldman Sachs has adopted a largely positive outlook on the Indian banking sector, initiating coverage across 14 major public and private sector banks. Out of the evaluated stocks, the brokerage has issued a 'Buy' recommendation on 6 banks, maintained a 'Neutral' stance on 4 banks, and recommended a 'Sell' on 4 banks.According to the report, private sector lenders are currently navigating a crucial juncture where sustained improvements in profitability will serve as the primary catalyst for stock performance.Banks with 'Buy' Recommendations and Target PricesGoldman Sachs has expressed strong confidence in top-tier private and select regional banks, setting lucrative target prices:HDFC Bank: Rated 'Buy' with a target price of ₹861. The brokerage expects the bank's pre-provisioning operating profit to recover through FY27, followed by high double-digit growth between FY27 and FY29.ICICI Bank: Rated 'Buy' with a target price of ₹1,935, highlighted as a consistent, long-term compounding growth story backed by a solid business franchise.Axis Bank: Rated 'Buy' with a target price of ₹1,477, supported by expected improvements in operating profit and favorable valuation levels.Kotak Mahindra Bank: Rated 'Buy' with a target price of ₹509, described as an under-appreciated banking franchise with high potential for operational recovery.Federal Bank & AU Small Finance Bank: Rated 'Buy' with targets of ₹425 and ₹1,270 respectively, driven by autonomous growth drivers and consistent profitability.Banks with 'Neutral' RatingsThe brokerage maintains a balanced risk-reward perspective for several major lenders, assigning a 'Neutral' stance:State Bank of India (SBI): Target price set at ₹1,170.IndusInd Bank: Target price set at ₹1,020, noting ongoing efforts to revitalize core operations against fair current valuations.IDFC First Bank: Target price set at ₹92, with earnings recovery largely factored into current market prices.Bandhan Bank: Target price set at ₹180.Banks with 'Sell' RecommendationsGoldman Sachs has adopted a cautious stance on select public and private lenders, advising investors to reduce exposure or consider selling:Yes Bank: Rated 'Sell' with a target price of ₹22. While return on assets is projected to improve incrementally, the brokerage notes it may not fully justify prevailing valuations.Punjab National Bank (PNB): Rated 'Sell' with a target price of ₹103, citing diminishing cyclical tailwinds and lingering profitability concerns.Bank of Baroda: Rated 'Sell' with a target price of ₹245, driven by concerns over a high loan-to-deposit ratio and capital-raising dynamics.RBL Bank: Rated 'Sell' with a target price of ₹285, reflecting expectations of a protracted recovery timeline.