HDFC Bank Share Price Gains As Analysts Say It's Better Placed To Withstand Retail Stress Cycle

HDFC Bank Ltd.'s share price gained on Monday as analysts said the lender is well–placed in the industry to withstand retail stress cycle due to its early risk–aversion strategy. The private–sector lender's second quarter earnings showed no signs of Net Interest Margin pressure or fresh slippage, compared to peers, Berstein said in a note on Saturday.

Asset quality of HDFC Bank remained 'solid', Bernstein said. "Most credit quality metrics remained stable unlike peers that saw a pickup in slippage and credit cost."

During July–September, HDFC Bank witnessed a decline in contingency provisioning, which was related to Alternate Investment Fund provisioning and not credit related, Bernstein said.

The brokerage retained 'outperform' rating on HDFC Bank stock with a target price of Rs 2,100 per share, which implied a 25% upside.

HDFC Bank's slippage remained flat at Rs 7,800 crore in the second quarter. Its credit cost remained stable sequentially at 44 basis points, which is better than Citi Research's estimates, the brokerage said.

The bank released Rs 6,800 crore AIF provisioning while it continued to carry AIF provisions of Rs 5,300 crore, Citi Research said. To adjust for this credit cost the impact is likely to be at 55 basis points. Now, the cumulative provisions stand at Rs 60,600 crore or 1.05% of the loans, Citi Research said.

The brokerage expects the credit cost to be contained at 0.5%-0.6% over FY25-27E. It has a 'buy' rating on HDFC Bank's stock and reduced the target price to Rs 1,950 from Rs 2,020 per share. The current target price implied an 18% upside from Friday's stock price.

Nuvama reiterated 'buy' on HDFC Bank stock, citing the private lender's strong risk assessment, and early risk aversion in unsecured loans and improving deposit share, the brokerage said in a note. Nuvama raised the target price to Rs 1,950 per share from Rs 1,850. The current target price implies a 16% upside from the current target price.

The only key negative is decline in credit growth, noted analysts. However, Motilal Oswal Financial Services estimates the loan growth will recover gradually as the earning growth accelerate. "We thus estimate HDFC Bank to deliver FY26E RoA/RoE of 1.8%/14.6%," the brokerage said.

Motilal Oswal Financial Services has 'buy' rating on the stock and hiked the target price to Rs 2,050 per share from Rs 2,000 apiece. The current target price implied a 22% upside from Friday's closing price.

HDFC Bank reported robust deposit growth for the second quarter in contrast to loan growth due to HDFC Bank's strategy, to bring down cost to deposit ratio, Motilal Oswal Financial Services said. The aim to bring down the CD ratio is likely to keep loan growth under pressure.

HDFC Bank reported 5% rise on its standalone net profit for July–September at Rs 16,281 crore, beating street estimates.

• Net profit up 5% on the year to Rs 16,821 crore versus Rs 15,976 crore.

• NII up 10% on the year to Rs 30,114 crore versus Rs 27,385 crore.

• Gross NPA at 1.36% versus 1.33% (QoQ).

• Net NPA at 0.41% vs 0.39% (QoQ).

HDFC Bank's share price rose 3.14% to Rs 1,734.60 apiece, the highest level since Oct. 1. It pared gains to trade 2.48% higher at Rs 1,723.50 apiece as of 09:45 a.m., compared to a 0.38% decline in the NSE Nifty 50.

The stock gained 14.44% in 12 months, and 0.75% year-to-date. Total traded volume so far in the day stood at 1.9 times its 30-day average. The relative strength index was at 57.49.

Out of 47 analysts tracking the company, 38 maintain a 'buy' rating and nine recommend a 'hold', according to Bloomberg data. The average 12-month analysts' consensus price target implies an upside of 12.3%.