Archive · 24 Aug 2026
Goldman Sachs Favors Private Banks Over PSU Lenders Ahead
Goldman Sachs thinks private banks may perform better than most state-owned banks over the next two years.
The difference in liquidity coverage between the two groups has become smaller.
Private banks may also receive more FCNR(B) deposits, which could improve their liquidity.
Their profits may benefit as unsecured lending becomes more normal.
Concerns about bad loans from unsecured lending have also eased.
State-owned banks may face higher credit costs under a new expected-credit-loss framework.
Their earnings could also receive less help from treasury gains and recoveries of written-off loans.
Goldman Sachs expects higher employee costs from a wage revision to hurt some PSU banks.
It specifically favors ICICI Bank and Kotak Mahindra Bank among large private lenders.
Goldman Sachs expects private banks to be better positioned than most PSU banks over the next two years.
Liquidity coverage ratios have largely converged, while private banks may attract a larger share of FCNR(B) deposits.
Private lenders could see improved loan economics as unsecured-lending growth normalizes and credit costs remain benign.
PSU banks, excluding SBI, may face higher credit costs, moderating treasury gains and written-off loan recoveries.
ICICI Bank and Kotak Mahindra Bank are Goldman Sachs’ preferred large private-bank picks, with 37% and 31% target-price upside, respectively.
- Who
- Goldman Sachs, private banks, PSU banks, ICICI Bank and Kotak Mahindra Bank.
- What
- Goldman Sachs published an outlook favoring private banks over most state-owned lenders, excluding SBI, over the next two years.
- When
- The outlook covers the next two years and includes projections for FY26-FY29; the next five-year wage revision is expected to take effect in November 2027.
- Where
- The banking sector covered by the Goldman Sachs report.
- Why
- Private banks are expected to benefit from improving liquidity, loan economics and asset quality, while PSU banks may face higher credit costs, moderating recoveries and rising employee costs.
Private Banks
PSU Banks
Relative performance
Private Banks
Goldman Sachs expects private banks to convert improving liquidity, margins and asset quality into stronger earnings growth.
PSU Banks
Most PSU banks, excluding SBI, are expected to underperform large private banks and experience more volatile performance.
Profitability drivers
Private Banks
Private banks may benefit from improving incremental disbursement spreads as unsecured-lending growth normalizes, with more benign credit costs.
PSU Banks
PSU banks’ recent return-on-assets improvement relied heavily on lower credit costs, while core PPoP-to-assets remained broadly flat.
Future pressures
Private Banks
Private banks may strengthen liquidity through a larger share of FCNR(B) deposits and benefit from continued asset-quality improvement.
PSU Banks
PSU banks may face higher credit costs under the expected-credit-loss framework, moderating treasury gains and written-off loan recoveries, and higher employee costs from the 2027 wage revision.
- Private-bank outlook
- Goldman Sachs expects private banks to be better placed over the next two years.
- Liquidity
- Liquidity coverage ratios between private and PSU banks have largely converged.
- FCNR(B) deposits
- Private banks are expected to capture a larger share of FCNR(B) deposits.
- ICICI Bank target
- Goldman Sachs set a target price of ₹1,935, implying 37% upside.
- Kotak Mahindra Bank target
- Goldman Sachs set a target price of ₹509, implying 31% upside.
- Core PPoP growth
- Goldman Sachs expects 17% growth for ICICI Bank and 15% for Kotak Mahindra Bank over FY26-FY29.
- PSU-bank wage pressure
- The next five-year wage revision, effective November 2027, is expected to weigh on FY28-FY29 earnings.