HDFC Bank Q2 review: Earnings in line with estimates; brokerages share price targets

Shares of HDFC Bank Ltd are in focus today after the country's largest lender reported its Q2 earnings. A majority of brokerages termed the earnings in line with expectations. The private sector lender reported a 4.7% year-on-year (YoY) increase in profit after tax (PAT) to Rs 19,510 crore in Q2, including treasury trading gains. Excluding these gains, the bank’s net profit grew 12.6% compared with the corresponding quarter of the previous year.

Treasury trading gains fell significantly to Rs 780 crore during the quarter from Rs 2,390 crore a year earlier. However, miscellaneous income, which includes recoveries and dividend income, increased to Rs 1,810 crore from Rs 1,530 crore in the year-ago period.

The lender reported a 9.7% YoY rise in net interest income (NII) to Rs 34,620 crore in the September quarter, compared with Rs 31,550 crore in the corresponding quarter last year. 

NII represents the difference between the interest earned on loans and investments and the interest paid on deposits and borrowings.

Bernstein on HDFC Bank 

Bernstein has an outperform rating on the stock with a target price of Rs 1,150 . Weak earnings growth continued for the second consecutive quarter.

NII grew 10% YoY, supported by 16% loan growth. Corporate / Mid-market / Retail loans grew 16% / 24% / 12% YoY. CASA deposits grew 11% YoY but continued to lag time-deposit growth, said the brokerage. 

While balance-sheet growth remained healthy & asset quality stayed resilient, weaker treasury income, & margin pressure weighed on profitability. As a result, return on assets (RoA) moderated marginally to 1.8% despite continued opex discipline.

JP Morgan on HDFC Bank 

JP Morgan is overweight on the banking stock with a target price of Rs 970. 

The brokerage said it delivered a steady 2Q27 with NII at Rs 346.2bn (+10% y/y) and PAT at Rs 195.1 bn (+5% y/y) coming broadly in line vs JPM estimates.

Reported NIMs fell 10bps q/q to 330bps and trailed JPM estimates on FCNR impact. The bank underscored a positive NIM outlook (neutral to positive going forward) driven by positive impact of a 25bps repo rate hike (70% book is floating with a significant portion linked to repo), along with mix shift towards higher yielding retail and MSME, partly offset by full impact of FCNR (B) in 3Q.

A fall in average LCR to 113% (vs 115% in 1Q, 110-120% target range) does reduce balance-sheet flexibility. However, asset quality remains healthy, said the lender. 

Goldman Sachs on Q2 

Goldman Sachs gave a buy call on the bank with a target price of Rs 861. 

Q2 core PPOP growth rose to 13% YoY from 8% in Q1 and was 2% above Goldman Sachs estimates, aided by continued cost optimization. Core revenue growth picked up to 10% YoY against 7% YoY last quarter. Loan growth trends were positive, and bank saw improved traction in business banking, unsecured loans, and autos for instance. NIMs, however, fell 8 bps QoQ, a larger-than-expected contraction vs GSe.

Nomura on Q2

Nomura has a Buy call with a target price of Rs 940. It said Q2 was largely in-line 2QFY27, with core PPOP of Rs 28700 crore (+12% y-y / +3% q-q). NII growth of 3% Q-o-Q lagged peers (Axis/ICICI at 5%/6%), reflecting lower FCNR(B) mobilization as a share of deposits (3.3% vs 7%/8% for Axis/ICICI).

Loan and deposit growth were healthy at 16% y-y / 5% q-q and 19% y-y / 5% q-q, respectively, though FCNR(B) inflows contributed 3 pp of q-q deposit growth. However, LCR moderated to 113% (-2 percentage points q-q) against largely stable levels of 124%/119% at ICICI/Axis, leaving the bank close to the lower end of its 110-120% operating band. This could constrain incremental loan growth, making deposit momentum the key swing factor, said Nomura.