HDFC Bank Q4 Results Review: Analysts Positive As Credit Costs To Remain Stable

HDFC Bank Ltd.'s fourth quarter earnings have brokerages optimistic, with Jefferies keeping the stock among its top picks and Macquarie maintaining an 'outperform' rating on the back of stable credit costs and improved margins.

The lender's operating profit declined 9.4% to Rs 26,537 crore compared to Rs 29,274 crore in the previous year. Provisions also saw a reduction of 76.4%, amounting to Rs 3,193 crore versus Rs 13,511 crore year-on-year.

The bank reported a net profit increase of 6.7% year-on-year to Rs 17,616 crore, and a 10.3% rise in net interest income to Rs 32,066 crore. Meanwhile net NPA stood at 0.43%, down from 0.46% quarter-on-quarter, while gross NPA improved to 1.33% from 1.42% quarter-on-quarter.

Here's what brokerages had to say about the lender's Q4 performance.

Macquarie maintained an 'outperform' rating on HDFC Bank, noting that the bank's Q4 profit after tax of Rs 17,616 was in line with their estimates. The lower-than-expected other income was offset by higher margins, with NIMs up 11 basis points quarter-on-quarter to 3.54%, the brokerage said.

"Growth to be in line with system levels. Credit costs to remain stable", Macquarie stated. The bank's loan growth, although muted at 5% year-on-year, is expected to align with system growth in FY26, it said.

The report highlighted margin improvement. "NIMs have been range-bound at 3.4-3.5% levels for the past 21 months."

Macquarie values HDFC Bank at 2.5 times fiscal 2027 estimates using their sum-of-the-parts valuation, citing potential for return on assets improvement driven by net interest margin expansion.

"The decline in the credit deposit ratio will be slower than the current trajectory, as seen at 96% in FY25 versus 104% in FY24...Management expects credit costs to remain stable given the strength of its underwriting franchise," the brokerage noted.

Jefferies has kept HDFC Bank among its top picks, highlighting that the bank's profit of Rs 17,616 crore for the fourth quarter was ahead of estimates, driven by improved loan growth and margins. The brokerage noted a 5% improvement in loan growth, the first in four quarters, and a 14% increase in deposit growth.

The bank saw "healthy operating performance", Jefferies noted. The bank's net interest margins held up better than expected due to benefits from cash reserve ratio cuts and lower leakage on Kisan Credit Card defaults. Asset quality remained strong, with gross non-performing loans at 1.3% and a specific coverage ratio of 68%, it said.

"We feel bank's loan growth will continue to improve over FY26 and FY27 as we expect bank's deposit growth to stay healthy at 16%," the brokerage said.

Jefferies also expects HDFC Bank's credit growth will be supported by lower loan-to-deposit ratio correction. It retained a 'buy' call, with a revised price target of Rs 2,340, up from Rs 2,120, based on 2.5 times June 2027 adjusted price-to-book ratio and the value of the bank's stake in subsidiaries.

Emkay Global Financial Services has raised the target price on HDFC Bank’s stock by 5% to Rs 2,200 and has retained its buy rating as it expects the bank to deliver a healthy return on assets of 1.8-1.9% in 2024-25 (Apr-Mar) to 2027-28. The brokerage has cut its earnings estimates by 3% for the period.

Dolat Capital Markets also hiked its target price by 8% to Rs 2,100 as the stock valuations benefit from increased confidence in the bank’s asset quality metrics.

HDFC Bank stands out for its strong execution and consistent growth metrics. Also, a contingent provision at 1% of advances provides additional comfort. However, the bank’s growth trends could remain lower relative to large private peers over the medium term because of loan-to-deposit ratio constraints post-merger, the brokerage said. Nonetheless, with normalisation in credit costs, the bank’s visibly superior asset quality and benefits from operating leverage will hold it in good stead.

"We look for higher business growth for a stronger stance... We tweak earnings, factoring in slightly lower NIM for FY26E, offset by improved OPEX assumptions," the brokerage note said.

Brokerage Nuvama Institutional Equities also echoed a similar view and raised the price aim on the stock to Rs 2,195 from Rs 1,950 on strong Jan-Mar earnings.

“We believe with positive outcomes on asset quality, a gain in deposit market share, improving LDR and an uptick in core NIM, Q4 was strong... While we are cutting NIM estimates, we are also revising OPEX and credit cost estimates, leading to an insignificant EPS revision,” Nuvama said.

IDBI Capital Markets also retained its buy rating with an upward revision in the target price of Rs 2,200 from Rs Rs1,970 as it structurally remains positive on HDFC Bank given its superior credit underwriting and the ability to maintain stable RoA around 1.8% post-merger.

Systematix has also tweaked its estimates to factor in the current margin run rate, the impact of rate cuts, and reduced costs to assets on the back of productivity benefits from branch ramp-ups.

It has retained its buy call with a target price of Rs 2,200 from Rs 2,030 earlier. Based on the brokerage’s credit-deposit estimates, HDFC Bank is likely to revert to pre-merger CD-Ratio levels by the beginning of FY27, which is likely to be the first normal year of operations for the merged entity.

Motilal Oswal Financial Services raised its earnings estimates on the bank by 3% and 5% for the current financial year and the next year and expects RoA of 1.9% and return on equities at 14.6% in 2026-27.

The brokerage has reiterated its buy rating on the stock, with an upside in target price of 15% to Rs 2,200.

While merger-related adjustments continue to weigh on credit growth and margins in the short term, brokerages remain confident in HDFC Bank’s long-term fundamentals. With healthy RoA and RoE expectations and improving operating leverage, the street sees HDFC Bank as a solid structural play.