HDFC Bank's shares experienced a significant decline of almost 5% on Monday, hitting a low of Rs 780.85 apiece. This downturn followed the bank's first-quarter results, which, while largely in line with analyst expectations, revealed a key disappointment: a weaker-than-anticipated net interest margin (NIM).
Analyst Reactions and Price Targets
The consensus target price for HDFC Bank stands at Rs 1,029.80, suggesting a potential upside of over 25% from Friday's closing price. Despite the immediate share price drop, several global brokerages have maintained positive outlooks and a range of target prices:
- UBS: 'Buy' with a target of Rs 1,130
- JPMorgan: 'Overweight' with a target of Rs 990
- Nomura: Target of Rs 950
- Macquarie: Target of Rs 1,150
- CLSA: Higher target of Rs 1,200
- Investec: Target of Rs 920
- Citi: Target of Rs 970
- HSBC: Target of Rs 990
- Morgan Stanley: Target of Rs 1,025
- Jefferies: Target of Rs 1,050
- Bernstein: Target of Rs 1,150
- BNP Paribas: Target of Rs 1,400
Antique Broking noted that the earnings miss was primarily due to a greater-than-expected NIM decline. However, they maintain a 'BUY' rating with a target of Rs 1,015, citing management's indications of levers for NIM improvement through replacing high-cost borrowings and an improving liability mix.
Key Financials and Outlook
HDFC Bank reported healthy deposit growth of 14.7%, with loan growth primarily driven by the SME and corporate segments. Slippages, however, increased to 1.2% due to seasonal stress in the agriculture portfolio.
Nirmal Bang Institutional Equities highlighted that NIM for HDFC Bank sequentially declined 12 basis points to 3.2% for the quarter. This was attributed to lower asset yields, likely influenced by a higher share of corporate lending and elevated wholesale funding costs. The bank's management has emphasized CASA (Current Account Savings Account) as a strategic priority, aiming to gradually return to pre-merger levels of 38–40% over the medium term.
MOFSL has revised its earnings estimates for FY27 and FY28, projecting HDFC Bank to deliver FY28 RoA and RoE of 1.84% and 14.7%, respectively, while reiterating a 'Buy' with a target of Rs 1,050.
Challenges and Triggers
JM Financial described HDFC Bank's results as 'growth without the glow,' pointing to a low Liquidity Coverage Ratio (LCR) of 115% and a stretched Credit-Deposit (CD) ratio of 96%. These factors, they argue, limit the bank's ability to grow at a faster pace, with loan growth supported by the wholesale portfolio, which has pressured NIM performance.
A potential re-rating of HDFC Bank stock is seen by analysts as contingent on resolving the ongoing management-related overhang, specifically the reappointment of the current MD & CEO, whose term is set to expire in October 2026.