HDFC Bank Ltd Q3 results came largely in line with analyst estimates, as deposit growth was strong but advances growth stood tepid, aligning with the bank’s strategy to reduce the CD ratio at an accelerated pace. Profit saw muted growth of 2.2 per cent due to a sharp slowdown in loan growth. Analysts said asset quality witnessed a marginal deterioration, while PCR declined to 67.8 per cent. They largely remained positive on the stock with 'Buy' ratings.
MOFSL said HDFC Bank holds healthy provisions of Rs 25,900 crore or 1 per cent of loans. Given the bank’s focus on reducing the CD ratio at an accelerated rate, it is factoring in a moderation in loan growth in FY25 and FY26 to 5 per cent and 10 per cent.
"The gradual retirement of high-cost borrowings, along with an improvement in operating leverage, will support return ratios over the coming years. We cut our earnings estimate for FY26/27 by 3 per cent each, reflecting slower loan growth and CASA moderation. Reiterate Buy with a target price of Rs 2,050," MOFSL said.
Nirmal Bang Institutional Equities said it stays 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.
"In addition, a non-specific provision buffer at 1.4 per cent of loan book provides comfort," it said while suggesting a target price of Rs 2,073.
For Nuvama Institutional Equities, HDFC Bank reported better-than-expected core slippage, lower LDR and a substantial gain in deposit market share. This is the first quarter of PSL for e-HDFC and the bank managed it smoothly amid fears of a miss, the brokerage said.
Slippage (ex-agri) stayed flat sequentially while including agri it grew 13 per cent QoQ. Even with agri, total lagged slippage ratio at 1.4 per cent remains lowest compared with private peers, Nuvama said.
"We believe with back-to-back positive outcomes on asset quality in a tough macro, a substantial gain in deposit market share, consistent improvement in LDR and core margins in-line with expectations, HDFC Bank delivered a strong quarter; reiterate ‘BUY’ with an unchanged target of Rs 1,950," Nuvama said.