Brokerage firms have turned positive on HDFC Bank Ltd and see a strong upside in the private banking major as they believe that the lender is marching towards normalized growth and profitability. Post the recent correction in the stock, they see up to 23 per cent potential in the counter, while some of them have upgraded their ratings.
Shares of HDFC Bank remained range bound on Friday between Rs 1,680-1,690, with a total market capitalization of Rs 12.85 lakh crore. The stock had settled at Rs 1,686.40 on Thursday. The stock has tanked nearly 10 per cent from its 52-week high of Rs 1,880 in December 2024. However, it is up 35 per cent from its 52-week low at Rs 1,398 hit about a year ago.
HDFC Bank reported a marginal rise of 2 per cent in its net profit at Rs 16,736 crore, while its net interest income (NII) came in at 8 per cent YoY higher at Rs 30,653 crore in the December 2024 quarter. Net interest margins (NIMs) remained flat at 3.4 per cent in Q3. Gross NPAs during the quarter increased to 1.42 per cent, while Net NPAs came in higher 0.46 per cent for the quarter.
HDFC Bank has been reporting softer loan growth as the bank prioritized profitable growth over top-line and remains focused on reducing its CD ratio. It is re-orienting the loan book towards higher-yielding CRB/retail assets and gradually replacing high-cost borrowings with deposits to improve margins. NIM is anticipated to exhibit a positive bias in the medium term, said Motilal Oswal Financial Services.
"Due to pressure on revenue lines the C/I ratio remains sticky however the bank maintains a tight control on cost-assets ratio and we estimate further moderation in cost-ratios from FY27E onwards driven by operating leverage and margin recovery. Asset quality remained strong with robust underwriting and risk-calibrated lending," it said with a 'buy' and a target price of Rs 2,050.
Nirmal Bang Institutional Equities has estimated a loan and earnings CAGR of 9.1 per cent and 11 per cent, respectively over FY24-FY27E, which results in RoA/RoE of 1.8 per cent/14.7 per cent in FY27E. It is positive on HDFC Bank for the long term due to its best-in-class asset quality, growth potential because of a good capital position and merger synergies in the long term. It has maintained a 'buy' rating on the stock but has trimmed to Rs 2,073.
Nomura finds HDFC Bank’s continued delivery on deposits in a tough macro environment encouraging. While the outlook for near-term loan growth is soft, it also implies faster reduction in LDR, after which the bank will be poised for loan growth re-acceleration. It is also well placed relative to peers on asset quality, and any potential easing of system liquidity could further aid deposit growth, said Nomura.
"We cut our loan and deposit growth estimates by 3-6 per cent for FY26-27F, and hence we cut our EPS estimates by 2-3%. However, we increase our target multiple to 2.1 times, as we factor in higher sustainable RoE. We upgrade our rating to 'buy' with target price of Rs 1,920," adds Nomura.
HDFC Bank continues to top the liability franchise scorecard. HDFC Bank is gaining market share and bottoming of earning cuts is critical for the sector to do well, says IIFL Securities. Repo rate cuts to further drive margin moderation, but is built into expectations and HDFC Bank should potentially buck the trend, it added with a 'buy' rating and a target price of Rs 1,900 on it.