'Buy' HDFC Bank shares: Chairman exit behind us? Target prices post Q4 results

A couple of brokerages have retained 'Buy' on HDFC Bank Ltd after the largest private sector bank's  March quarter results. The lender reported a miss on net interest income (NII) and pre-provision operating profit (PPoP) due to lower interest income, however, beat on opex and provisions led to higher profit. Brokerages such as Nuvama Institutional Equities noted that loan-to-deposit ratio improved to 94.6 per cent in Q4FY26 from 98.7 per cent  sequentially, as deposits outpaced loans. Net interest margin (NIM) improved 3 basis points sequentially to 3.38 per cent for the quarter, they said.. 

HDFC Bank's asset quality remained the best-in-class with gross non-performing asset (NPA) ratio improving 9 basis points sequentially. The RBI’s mandate to unwind dollar positions led to subdued treasury income, Nuvama said.

"The chairman’s exit is largely behind us, but sentiment remains cautious. We reiterate ‘BUY’ but cut FY27E EPS by 3 per cent and reduce our target and valuation multiple to Rs 1,050/2.3 times BV FY27E from Rs 1,170/2.7 times, given the sharp fall in stock and limited visibility of near-term rerating," Nuvama said.

MOFSL said HDFC Bank posted an in-line quarter, characterised by healthy business growth, net interest margin (NIM) expansion and robust asset quality. Loan growth was healthy, led by corporate and SME loans, while retail loan growth was modest. 

This brokerage said deposit growth for HDFC bank was stellar at 14.4 per cent YoY and, as a result, the CD ratio declined to 94.6 per cent 

It estimated CD ratio to decline towards 92 per cent by FY28 in a calibrated manner. The bank has maintained a contingency and floating provisions at Rs 15,700 crore and Rs 21,400 crore, respectively. 

"We expect NIMs to see a gradual improvement, with gradual retirement of high-cost borrowings and an improvement in operating leverage, which will support return ratios over the coming years. We largely maintain our earnings estimates and expect HDFCB to deliver FY27E RoA/RoE of 1.84 per cent/14.4 per cent. Reiterate BUY with a target of Rs 1,100," it said.

Systematix also maintained 'Buy' rating for HDFC Bank with an unchanged target price of Rs 960. It values the standalone bank at 1.9 times on its estimated FY28 adjusted book value per share of Rs 438 for a return on equity (RoE) profile of 14 per cent for FY27E. 

Nirmal Bang Institutional Equities said 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), potential for margin improvement and merger synergies in the long term. It gave a target of Rs 1,069 on the stock.