Most analysts hiked the target price for the HDFC Bank Ltd. while maintaining the stock rating as the private lender surprised the street with better-than-expected performance for the first quarter.
Key positives from HDFC Bank's first-quarter earnings were improved growth in loans and deposits, a lower reduction in net interest margin, and stable asset quality, Jefferies said. The private lender remained Jefferies' top pick in the segment as the brokerage expects further improvement.
HDFC Bank reported that its loan grew 7% on the year during April–June, while deposits grew 16% on the year, Jefferies said in a report. Business, banking, and automobile segments led the growth in loans.
The private lender is expecting no risk in its asset quality while it increased its buffer using the proceeds from HDB Financial's initial public offering, according to Bernstein. The lender is expecting to drive growth across rural, urban, and MSME and corporate loan segments because of monetary and fiscal stimulus.
HDFC Bank beat CLSA's estimates by delivering only an 11-basis-point reduction in net interest margin against a 15 bps expectation. Another positive from the first quarter results was that HDFC Bank is able to keep its operating expenditure flat on a sequential basis.
HDFC Bank gained Rs 9,100 crore from the initial public offer of its subsidiary HDB Financial in the first quarter. The private lender used most of the IPO proceeds for a buffer, CLSA said.
HDFC Bank reported a slight beat on earnings estimates due to a tax reversal, Motilal Oswal Financial Services said. The brokerage expects that the HDFC Bank will likely deliver a 1.9% return on assets and a 14.9% return on equity for the financial year 2027.
