HDFC Bank shares jump post Q1 results; should you buy stock?

HDFC Bank Ltd, the third-most valued stock on Dalal Street, climbed over 2 per cent in Monday's trade, commanding Rs 12.50 lakh crore in market capitalisation, following the private lenders' June quarter results. HDFC Bank's Q1 results were mostly in line with the Street estimates, as deposit mobilisation remained key variable impacting loan growth and net interest margin (NIM). Analysts largely maintained ‘Buy’ on the stock, as they believe most negatives are priced in. 

The HDFC Bank stock rose 2.3 per cent to hit a high of Rs 1,644.20 on BSE. The stock is down 3 per cent in 2024 so far and 2 per cent in the past one year.

A reduction in LDR continues to be the focal point of HDFC Bank's strategy and is likely to guide overall direction for the bank, JM Financial said. This brokerage sees continued systemic challenges in deposits to result in slower loan growth for HDFC Bank in the near-term but sees LDR dropping below 100 per cent by March 2026. 

"We forecast RoAs of 1.82 per cent and RoEs of 15 per cent for HDFC Bank for FY25E/26E. Ability to restructure the balance sheet (by faster than expected accretion in deposits) remains a key upside risk. Maintain BUY with a revised target price of Rs 1,950," it said.

The HDFC Bank CEO reiterated that while there is no regulator imposed LDR, the bank would likely lower LDR sooner than later, Nuvama said. It believes course correction of the balance sheet should continue for the next six–seven quarters till LDR falls to below 100 per cent from 105 per cent. 

"We are tweaking earnings to factor in lower asset growth. Revising TP to Rs 1,850 from Rs 1,750. Retain ‘BUY’ as most negatives appear priced in," it said.

Manish Chowdhury, Head of Research at StoxBox said while HDFC Bank faced NIM pressure, a common issue within the banking industry, he sees strong indicators the bank will improve overall profitability going ahead. 

"While the RoAs showed some weakness this quarter, it's important to note that the first quarter tends to be a softer period for HDFC Bank. The slight dip in asset quality is something to watch closely, but it doesn't overshadow the bank's long-term potential," he said.

MOFSL maintained its 'Buy' rating on the stock with a target price of Rs 1,850.