HDFC Bank's Q4 Earnings Exceed Estimates, Brokerages Maintain Bullish Outlook

HDFC Bank Stock Remains in Focus After Earnings Beat

HDFC Bank's stock continues to attract attention today following the lender's Q4 FY26 earnings, with brokerages largely maintaining bullish calls. Analysts point to earnings resilience driven by lower credit costs, despite core income metrics remaining soft. The shares of HDFC Bank ended the previous session 0.6 percent higher at Rs 800 apiece, though the stock has fallen 17 percent over the last one year.

HDFC Bank reported a 9.1 percent year-on-year rise in net profit at Rs 19,221 crore in the January-March quarter, surpassing Street estimates, aided by lower provisions and costs. However, net interest income (NII) growth remained modest at 3.8 percent YoY and fell short of expectations, reflecting pressure on margins and product mix. Asset quality improved sequentially, with both gross and net NPAs declining, while provisions eased during the quarter.

Brokerages highlighted that the earnings beat was largely driven by lower credit costs rather than strong core operating performance. Morgan Stanley noted that profit exceeded estimates by 4 percent due to lower provisions and costs despite slightly weak core revenue. The brokerage has an 'overweight' call on HDFC Bank stock, with a target price of Rs 1,025 per share, implying an upside of over 28 percent.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Brokerage Views on HDFC Bank Stock

On growth, most brokerages remain constructive. CLSA noted that loan growth was in line and deposit growth improved sequentially, leading to a reduction in the loan-to-deposit ratio (LDR) to 95 percent from 99 percent. CLSA has an 'outperform' rating, with a target price of Rs 1,200 per share, implying an upside of 50 percent.

Jefferies highlighted that deposit growth of 14 percent supported loan growth of 12 percent and helped ease balance sheet constraints, with LDR no longer seen as a binding issue. The brokerage has a 'buy' call with a target price of Rs 1,050.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Margins remained broadly stable. CLSA pointed to a marginal sequential improvement despite higher funding costs. Bernstein noted that margins were resilient even as the bank continues balance sheet adjustments post-merger. However, NIMs were flagged as soft by multiple brokerages, citing competitive pressures and product mix as key factors.

Asset quality trends were encouraging, with slippages declining year-on-year for the third consecutive quarter, according to CLSA. Nomura also said that asset quality remains strong, supporting the bank's medium-term earnings outlook.

Brokerages expect growth to improve over the next two years. JPMorgan sees NII growth picking up in FY27-28, supported by better credit growth and easing funding costs, while Nomura expects return ratios of around 1.8 percent RoA and 14 percent RoE over the same period.

Management commentary also reinforced confidence on balance sheet strength and growth visibility. MD & CEO Sashidhar Jagdishan said funding and the loan-deposit ratio are no longer constraints. He highlighted continued customer additions and leadership across key segments such as credit cards, mortgages, and MSME lending.

Despite near-term pressure on core income, brokerages continue to view HDFC Bank as a preferred pick, citing strong earnings resilience, improving balance sheet metrics, and reasonable valuations.