HDFC Bank shares fall 5% after Q1 NIM miss: Targets by UBS, Bernstein, Citi, Jefferies and others

HDFC Bank's Q1 results were largely in line with analyst estimates, although weak net interest margin (NIM) was a key disappointment. Analysts noted that deposit growth remained healthy at 14.7 per cent, while loan growth was driven by the SME and corporate segments. Slippages rose to 1.2 per cent due to seasonal stress in the agriculture portfolio. A re-rating of HDFC Bank Ltd stock is contingent on the resolution of the ongoing management-related overhang. 

The consensus target price for HDFC Bank stands at Rs 1,029.80, which hints at 25.60 per cent potential upside over Friday's closing price. On Monday, the scrip fell 4.73 per cent to hit a low of Rs 780.85 apiece. 

Among global brokerages, UBS suggested 'Buy' on the stock with a target of Rs 1,130. JPMorgan has 'Overweight' recommendation with a target of Rs 990. Nomura sees the stock at Rs 950; Macquarie suggested a target of Rs 1,150 on the stock, while CLSA has a higher target of Rs 1,200 on the scrip. Investec gave a target of Rs 920, Citi Rs 970, HSBC Rs 990, Morgan Stanley Rs 1,025, Jefferies Rs 1,050, Bernstein Rs 1,150 and BNP Paribas Rs 1,400. 

Antique Broking said HDFC Bank reported an earnings miss, primarily due to weaker-than-expected net interest income (NII) as the NIM decline was higher. 

While near-term margin pressure persists, the management indicated that levers for NIM improvement remain in place through the replacement of high-cost borrowings and an improving liability mix. 

"Loan growth recovery was the key positive; however, the pace of NIM recovery will remain the key monitorable going forward. In the near term, the key trigger for the stock remains the reappointment of the current MD & CEO, whose term is set to expire in October 26. Maintain BUY," it said while suggesting a target of Rs 1,015.

Nirmal Bang Institutional Equities said NIM for HDFC Bank declined 12 basis points sequentially to 3.2 per cent for the quarter, primarily due to lower asset yields,  likely driven by a higher share of corporate lending and elevated wholesale funding costs. 

CASA remained a strategic priority, with the bank targeting a gradual return towards pre-merger levels of 38–40 per cent over the medium term. Nirmal Bang expects HDFC Bank margins to recover gradually, supported by lower funding costs through reduced borrowings, an improving CASA mix, and a higher retail asset mix.

MOFSL said it has cut its earnings estimates for FY27 and FY28 and projected HDFC Bank to deliver FY28 RoA and RoE of 1.84 per cent and 14.7 per cent, respectively. It reiterated 'Buy' with a target of Rs 1,050. 

Systematix maintained 'Buy' rating for HDFC Bank with an unchanged target price of Rs. 950. ICICI Securities (Rs 1,020), Axis Capital (Rs 1,030), PhillipCapital (Rs 950), DAM Capital (Rs 965), JM Financial (Rs 900), Nuvama (Rs 1,025), KR Choksey (Rs 1,011) and 360 One Capital (Rs 960) are some other brokerages keeping their positive view on HDFC Bank intact.

"We stay constructive on large-cap PVBs in general and believe HDFCB's strong franchise, robust capital/provision buffers and undemanding valuation offer an attractive risk-reward. Though HDFCB’s re-rating will be contingent on long awaited clarity on the MD’s term extension," Nuvama said.

JM called HDFC Bank results as growth without the glow.

"The low LCR of 115 per cent along with the stretched CD ratio of 96 per cent limits the bank’s ability to grow at a faster pace. Consequently, loan growth has been supported by higher growth in the wholesale portfolio, which has weighed on NIM performance. Nevertheless, we are positive on NIM performance over the medium term," JM said.