Buy the Giants, Avoid the Rest? BoFA bets on two large banks, downgrades popular smaller ones

Brokerage firm BoFA Securities has turned constructive on large private banks in its latest note on Tuesday, April 7, as it sees value emerging in these names.BoFA wrote in its note that the price correction seen in these lenders is overdone. However, it went on to add that a prolonged war in Iran could impair earnings for these lenders by 3% to 23%.

The brokerage has maintained its “buy” rating on both HDFC Bank and ICICI Bank in its latest note. For HDFC Bank, it has cut its price target to ₹950 from ₹1,175, while for ICICI Bank, it has cut its target to ₹1,500 from ₹1,750 earlier. In fact, BoFA’s revised price target of ₹1,500 for ICICI Bank is also the recent 52-week high for the stock.
HDFC Bank’s revised price target implies an upside potential of 24% from current levels, while for ICICI Bank, the revised price target indicates a 22% potential upside.
BoFA’s constructive stance on these large lenders is driven by the current macro outlook, along with attractive valuations. HDFC Bank shares have corrected over 25% from their recent 52-week high.

Mid-Sized Lenders Downgraded

While BoFA has turned constructive on large private lenders, it sees a higher risk to growth, asset quality and Net Interest Margins (NIMs) for their mid-sized peers. A combination of a potential rate hike by the RBI, along with tight funding conditions could pressure the margins for these lenders.As a result, it has issued a double-downgrade for RBL Bank to “underperform” from its earlier rating of “buy” and also cut its price target to ₹325 from ₹360 earlier.

The brokerage has also downgraded Federal Bank to “underperform” from its earlier rating of “neutral”, with a price target of ₹280. The revised price targets for both RBL and Federal is nearly the same price at which the stocks closed on Monday.

BoFA also has “buy” rating on AU Small Finance Bank, with a price target of ₹150.

The Nifty Bank index is down 12% so far in 2026, with only Union Bank, SBI and Federal Bank having positive returns amidst this conflict.