What’s in store for investors? December quarter performance points to steady balance-sheet expansion, with brokerages flagging a mixed near-term outlook on margins amid moderating yields, even as asset quality and cost discipline remain supportive.
Management has indicated that most of the asset-side repricing is now behind, and NIMs are expected to benefit from the downward repricing of term deposits, with rate cuts already reflected in savings account rates.
Axis Securities says HDFC Bank has remained largely on track with its guidance as it works towards reverting to pre-merger levels across key metrics, underpinned by strong execution capabilities. The brokerage has assigned a target price of Rs 1,170 per share, an upside of 23% from current levels. With the loan-to-deposit ratio (LDR) now below 100%, the bank is likely to accelerate growth in FY26 to align with system-wide trends. A further pickup in growth in FY27E, alongside sustained deposit mobilisation, should help bring the LDR down to sub-90%. Margin pressure seen in H1 is expected to ease in H2, supported by deposit repricing and the impact of CRR cuts on exit margins.
InCred Equities, with a price target of Rs 1,180 per share, says margins are expected to trough at levels better than earlier anticipated, and, together with benign asset quality trends and sustained deposit growth momentum, this should support a rerating of the stock in the coming months.
The Street is likely to closely track the extent of PSL compliance through organic growth as well as the bank’s borrowing repayment schedule. The brokerage maintains an ADD rating on HDFC Bank with a target price of Rs 1,180, implying a valuation of about 2.5x FY27F core P/BV, citing strong management, resilient underwriting across cycles, and the bank’s ability to consistently gain market share, supported by healthy deposit growth, stable asset quality and relatively better margin performance versus large private-sector peers.
According to Yes Securities, the bank is likely to report sequential loan growth in the 2.5% range. Net interest income (NII) growth is expected to trail loan growth marginally, as the decline in yields on advances is seen outpacing the reduction in cost of deposits. As a result, net interest margins (NIMs) are likely to soften sequentially. On the positives, fee income growth is expected to outpace loan growth, operating expense growth should remain lower than overall business growth, and asset quality trends are likely to improve sequentially. Slippages and provisions are both expected to decline on a quarter-on-quarter basis, aided by seasonality.Systematix, however, sees a slightly different margin picture. It noted that provisional gross advances grew 2.7% quarter-on-quarter, and expects the fall in yield on advances to be fully offset by a decline in cost of deposits. This could lead to marginally higher NIMs sequentially. While slippages are expected to edge up slightly, provisions are still likely to be lower compared to the previous quarter, which had seen a one-off spike in provisioning in Q2 FY26.
The bank also reported its Q3 business update earlier this week. Average advances under management during the quarter stood at Rs 28.64 lakh crore, up around 9% from Rs 26.28 lakh crore in the corresponding quarter last year. On a period-end basis, advances under management rose 9.8% year-on-year to about Rs 29.46 lakh crore as of December 31, 2025. Period-end gross advances grew at a faster pace of 11.9% year-on-year to Rs 28.45 lakh crore, indicating sustained traction in core lending activity.
On the liabilities side, HDFC Bank reported healthy deposit growth. Average deposits for the quarter rose 12.2% year-on-year to Rs 27.52 lakh crore. Average CASA deposits grew 9.9% to Rs 8.98 lakh crore, while average time deposits increased a stronger 13.4% to Rs 18.54 lakh crore, highlighting continued success in term deposit mobilisation. Period-end total deposits stood at Rs 28.60 lakh crore, up 11.5% year-on-year, with CASA deposits rising 10.1% to Rs 9.61 lakh crore.
Shares of HDFC Bank rose about 12% in 2025.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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