HDFC Bank bonus shares, Q1 results: Strong provisions prompt ‘Buy’ call from stock analysts
HDFC Bank has prudently utilised the stake sale gains in its subsidiary HDB Financial to take the total stock of such provisions to Rs 36,600 crore, stock analysts said.
- Jul 21, 2025,
- Updated Jul 21, 2025 8:56 AM IST
The June quarter results of HDFC Bank Ltd were a beat on pre-provision operating profit (PPOP) and profit after tax (PAT) due to tax reversals. The net interest income (NII) came in line with Street forecast, but net interest margin (NIM) fell marginally short of analyst expectations.
The weekend also saw the private lender announcing a bonus share in the ratio of 1:1 and also a special interim dividend of Rs 5 per share amid a post-tax gains on part stake sale in HDFC Financial Services. Analysts said HDFC Bank has prudently utilised the stake sale gains in its subsidiary HDB Financial and made floating provisions of Rs 9,000 crore and contingency provisions of Rs 1,700 crore to take the total stock of such provisions to Rs 36,600 crore. Net-net, they maintained 'Buy' rating on the stock.
"We are 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 1.8 per cent of the loan book provides comfort. We maintain BUY on the stock," said Nirmal Bang Institutional Equities.
This brokerage suggested a target price of Rs 2,338, hinting at 20 per cent potential upside.
Nirmal Bang said the Q1 results were steady, with a slight earnings beat due to tax reversals.
"The NIM contracted 11bp QoQ and is expected to moderate further in 2Q due to the rate cut impact. Business growth aligns with the bank’s strategy to reduce the C/D ratio consistently, though the bank indicated it would improve its credit growth trajectory moving forward. Slippages increased mainly due to agri seasonality, while PCR was stable at 66.9 per cent," it said while suggesting a target price of Rs 2,300.
The gradual retirement of high-cost borrowings, along with an improvement in operating leverage and the provision buffer, will support return ratios over the coming years, MOFSL added.
"Given a fortified buffer of provisions, which is a traditional strength of HDFC Bank, likely pickup in growth and stability in NIM in H2, we reiterate ‘Buy’. We are revising target price to Rs 2,270/2.8x BV FY26E from Rs 2,195," Nuvama Institutional Equities said.
The June quarter results of HDFC Bank Ltd were a beat on pre-provision operating profit (PPOP) and profit after tax (PAT) due to tax reversals. The net interest income (NII) came in line with Street forecast, but net interest margin (NIM) fell marginally short of analyst expectations.
The weekend also saw the private lender announcing a bonus share in the ratio of 1:1 and also a special interim dividend of Rs 5 per share amid a post-tax gains on part stake sale in HDFC Financial Services. Analysts said HDFC Bank has prudently utilised the stake sale gains in its subsidiary HDB Financial and made floating provisions of Rs 9,000 crore and contingency provisions of Rs 1,700 crore to take the total stock of such provisions to Rs 36,600 crore. Net-net, they maintained 'Buy' rating on the stock.
"We are 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 1.8 per cent of the loan book provides comfort. We maintain BUY on the stock," said Nirmal Bang Institutional Equities.
This brokerage suggested a target price of Rs 2,338, hinting at 20 per cent potential upside.
Nirmal Bang said the Q1 results were steady, with a slight earnings beat due to tax reversals.
"The NIM contracted 11bp QoQ and is expected to moderate further in 2Q due to the rate cut impact. Business growth aligns with the bank’s strategy to reduce the C/D ratio consistently, though the bank indicated it would improve its credit growth trajectory moving forward. Slippages increased mainly due to agri seasonality, while PCR was stable at 66.9 per cent," it said while suggesting a target price of Rs 2,300.
The gradual retirement of high-cost borrowings, along with an improvement in operating leverage and the provision buffer, will support return ratios over the coming years, MOFSL added.
"Given a fortified buffer of provisions, which is a traditional strength of HDFC Bank, likely pickup in growth and stability in NIM in H2, we reiterate ‘Buy’. We are revising target price to Rs 2,270/2.8x BV FY26E from Rs 2,195," Nuvama Institutional Equities said.