HDFC Bank Q3 Results Review: IDBI Capital Maintains 'Buy' On The Stock, Sees 18% Upside — Here's Why

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IDBI Capital Report

HDFC Bank Ltd. reported slower credit growth at 1% QoQ (3% YoY) while deposit growth stood at 3% QoQ (16% YoY) led by focus on lowering of CD ratio; at 99.8% versus 103.5% QoQ.

Management maintained guidance for improvement in credit growth similar to industry average during FY26 and higher than industry during FY27. Net interest margins declined slightly to 3.43% as cost of funds remain stable; however, we need to watch out for impact of rate cut on NIMs as ~70% loan book is linked to EBLR.

Asset quality slightly deteriorated as gross non-performing asset stood at 1.42% versus 1.36% QoQ led by higher slippages. Net interest income grew by 8% YoY led by stable NIMs while pre-provision operating profit grew by 6% YoY due to lower other income (up 3% YoY). PAT grew by 2% YoY led by higher tax rate. We have revised estimates lower by 2% book value for FY26E and rolled over to FY27E estimates. We maintain Buy rating with the target price of Rs 1,970 valuing parent business at Rs 1,795 at 2.1x P/ABV FY27E.

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