Goldman Sachs downgrades key banking stocks

New Delhi: Marquee global brokerage Goldman Sachs has downgraded key Indian banking stocks and cut earnings estimates across the coverage universe by 5 per cent/2 per cent on average over FY25E/26E.

Goldman Sachs said: “We believe the proverbial Goldilocks period (strong growth & strong/visible profitability) is over for the financial sector in the near-term as headwinds are increasing such as rising pressure on cost of funds due to structural challenges in the funding environment, growing concerns on rising consumer leverage posing potential asset quality challenges, particularly in unsecured lending ($127bn loan book in the sector) leading to higher credit costs.”

It said: “Hence, we prefer commercial retail over consumer retail which is expected to grow faster and offers a much better returns profile and pressure on operating costs due to elevated wage inflation as well as the need to expand the distribution network for future deposit growth. We downgrade to Neutral from Buy: SBI (4% downside) and ICICI Bank (3% upside); and downgrade Yes Bank to Sell from Neutral (37% downside).”