The buzz around the IPO of HDB Financial Services is gaining momentum and perhaps it is a good time to also take a look at the share price movement of its promoter company, HDFC Bank. In fact, the HDFC Bank shares are up almost 20% in the last 1 year. The bank was in news recently after the allegations by the Lilavati Trust. Brokerages see it as a non-event for the bank.
Interestinly two key brokerage houses, Jefferies and Motilal Oswal, have placed strong bets on this banking heavyweight, reaffirming “Buy” ratings. But what is fuelling their optimism?
Here are key reasons why brokerages continue to stay bullish on HDFC Bank –
Jefferies on HDFC Bank: One of the top picks despite row with Lilavati Trust
The brokerage firm Jefferies has maintained a “Buy’ rating on HDFC Bank with a target price of Rs 2,340, an upside of 22% from the current market price. The brokerage firm noted, “We see recent allegations on bank/CEO as a non-event, albeit noisy. Bank stays among top picks in sector,” referring to recent reports in the media.
Jefferies on HDFC Bank: Policy tailwinds and rate cuts
Jefferies believes the current policy environment could work in favour of the bank. While the 50 bps rate cut was on expected lines, the unexpected 100 bps CRR cut came as a surprise, which could help bring down the overall funding cost.
“Policy action can lift growth in H2 and demand for retail consumption-related credit can improve as the busy season picks up,” the brokerage added.
With reduced cost of borrowing, both banks and customers could benefit, setting the stage for increased consumption loans and credit demand in the second half of FY26.
Jefferies on HDFC Bank: Loan growth on track
Management indicated that loan growth for FY26 is likely to be in line with the industry, and by FY27, HDFC Bank could outpace sector averages. On the deposits front, growth continues to exceed sector levels, which should help the bank bring down its Loan-to-Deposit Ratio (LDR) by about 4 to 5 percentage points annually over the next two years, noted the report.
Margins (NIMs), however, may face some short-term pressure due to early impact of the rate cuts, but Jefferies believes this will correct over time.
Jefferies on HDFC Bank: Valuation not too rich
Jefferies remains upbeat on HDFC Bank’s valuation, which it notes has rerated but still looks attractive in the context of global peers.
“Valuations have rerated at 18x FY26 PE / 2.3x FY26 adjusted PB… but Indian banks’ relative premium to well-run global banks isn’t as large as earlier,” the brokerage stated.
It maintains a Buy rating with a target price of Rs 2,340, based on 2.5x Jun-27 adjusted Price-to-Book (P/B).
Motilal Oswal on HDFC Bank: Healthy earnings growth, improving margins and asset quality
Motilal Oswal also holds a Buy rating on HDFC Bank. “We raise our earnings estimates by 3%/5% for FY26/FY27 and reiterate our Buy rating with a target price of Rs 2,200,” the brokerage said in its note.
Motilal Oswal on HDFC Bank: Strong Net Interest Income, cost efficiency in play
HDFC Bank reported a 10.3% YoY increase in NII to Rs 32,060 crore, which beat estimates. This was supported by strong loan growth and a Rs 700 crore inflow from income-tax refunds, added the report.
Core Net Interest Margin (NIM) improved to 3.46%, and when including the IT refund, overall margin rose to 3.54% in Q4FY25.
The cost-to-income ratio also improved to 39.8%, showing better operational efficiency.
Motilal Oswal on HDFC Bank: Credit-deposit ratio coming down, asset quality improving
As per the brokerage report, loans grew 5.4% YoY to Rs 26.2 lakh crore, while deposits rose 14% YoY to Rs 27.1 lakh crore, helping the Credit-to-Deposit (C/D) ratio to ease to 96.5%. The bank is expected to continue improving this metric over the next few quarters.
Asset quality also remained stable, with Gross NPA at 1.33% and Net NPA at 0.43%. Provision Coverage Ratio (PCR) stood at a healthy 67.9%.
Motilal Oswal on HDFC Bank: Performance of HDB Financial Services adds long-term value
According to the brokerage, HDB Financial Services, the soon-to-be-listed NBFC arm, posted a loan growth of 18.5% YoY, with PAT at Rs 530 crore. Meanwhile, HDFC Securities saw its revenue grow by 14% YoY to Rs 740 crore, although PAT declined by 21% YoY.
“HDFCB posted a steady quarter with in-line earnings and a beat in NII, while the core margin improved 3bp QoQ,” Motilal Oswal noted.
They also observed that HDFC Bank continues to carry healthy floating and contingent provisions worth Rs 25,900 crore, or 1% of total loans, which gives a strong cushion against future credit stress.
Motilal Oswal is forecasting loan growth of 10% in FY26 and 13% in FY27, with a further boost expected from better operating leverage and retirement of high-cost borrowings.
The price target is set at Rs 2,200, based on 2.4x FY27E Adjusted Book Value plus Rs 307 value from its subsidiaries.
