HDFC Bank Q4 Results Review: Steady; Growth Trajectory Set To Accelerate — Motilal Oswal Maintains 'Buy'

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Motilal Oswal Report

HDFC Bank Ltd. posted a steady quarter with in-line earnings and a beat in net interest income, while the core margin improved 3 basis points QoQ. Further, net interest margin (including IT refunds) rose 11 bp QoQ to 3.54% in Q4 FY25. Business growth was healthy while aligning with the bank’s strategy to reduce the credit/deposit ratio consistently. Asset quality improved, with slippages remaining at a controlled level, while provision coverage ratio stood stable at ~67.9%.

Further, HDFC Bank continues to hold healthy provisions (floating + contingent) of Rs 259 billion, or 1.0% of loans. We factor in loan growth of 10%/13% for FY26/FY27. The gradual retirement of high-cost borrowings, along with an improvement in operating leverage, will support return ratios over the coming years.

We raise our earnings by 3%/5% for FY26E/27E and estimate HDFC Bank to deliver an FY27E RoA/RoE of 1.9%/14.6%. Reiterate Buy with a target price of Rs 2,200 (based on 2.4x FY27E adjusted book value + Rs 307 for subs).

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