HDFC Bank: Buy or sell? Brokerages maintain bullish view, see up to 18% upside on margin stability and long-term loan growth

Business Upturn

7 days ago

By News Desk Published on July 21, 2025, 08:37 IST
Top brokerages remain bullish on HDFC Bank, reaffirming Buy ratings after the private lender reported a steady Q1FY26 performance. While net interest margins (NIM) compressed more than expected and slippages ticked up marginally, analysts point to strong provisioning, resilient core profitability, and a roadmap for loan growth revival as reasons to stay constructive on the stock. Nomura – Buy | Target: ₹2,190 | Upside: 12%
Nomura described the June quarter as a steady operating performance, with some softness on asset quality. However, the brokerage expects loan growth to pick up going forward, and sees the bank delivering RoA of 1.7–1.9% and RoE of 13–14.5% over FY26–28F. It values the core bank at 2.3x Jun-27F BVPS, maintaining a confident long-term view. Nuvama – Buy | Target: ₹2,270 | Upside: 16%
Nuvama highlighted a sharp 19 basis point QoQ drop in reported NIM, more than expected, but noted that core NIM declined only 11bps, reflecting underlying resilience. HDFC Bank reprices its EBLR (External Benchmark Linked Rate) loans faster than peers, affecting near-term margins.
The bank's asset quality remained best-in-class, with higher slippages primarily due to seasonal farm stress. Importantly, HDFC utilised nearly its entire ₹91 billion gain from HDB Financial Services for contingency and floating provisions, recognising just ₹8 billion as net gains—showcasing prudence in capital management. Core NII and PPOP were flat QoQ and up YoY, indicating operational stability. Bernstein – Buy | Target: ₹2,300 | Upside: 18%
Bernstein called it a good set of numbers, with headline EPS up 11% YoY. After adjusting for one-offs like the HDB stake sale, floating provisions, and tax credits, EPS growth stood at 7% YoY. Bernstein highlighted the loan-to-deposit ratio (LDR) falling to 95%, which positions the bank well to repair its balance sheet and resume healthy loan growth from FY27E. The brokerage continues to back HDFC Bank's long-term potential. Brokerage Summary: Brokerage Rating Target Price (₹) Upside from CMP (₹1,956) Bernstein Buy 2,300 +18% Nuvama Buy 2,270 +16% Nomura Buy 2,190 +12%
Despite near-term margin pressures, brokerages believe HDFC Bank's strong provisioning, capital discipline, and improving loan-to-deposit metrics will support sustainable growth over the next few years. All three firms remain firmly on the buy side, citing a favourable risk-reward at current levels.
Disclaimer: The brokerage views expressed are based on publicly available research reports and do not constitute investment advice. Readers should consult a certified financial advisor before making any investment decisions.
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