HDFC Bank's December quarter performance drew largely constructive commentary from global and domestic brokerages, even as most analysts flagged that the pace of recovery and re-rating may remain gradual. The common thread across reviews was steady improvement in core metrics, led by margins and asset quality, while deposit growth and operating costs continued to be watchpoints.

HDFC Bank Q3 Highlights

• Gross NPA flat at 1.24% QoQ; Net NPA flat at 0.42% QoQ.
• NII up 6.3% at Rs 32,615 crore YoY.
• Operating Profit up 8% at Rs 27,098 crore YoY.
• Provisions down 18% at Rs 2,838 crore versus Rs 3,501 crore QoQ.
• Net Profit up 11.5% at Rs 18,654 crore versus Rs 16,736 crore YoY.
• Sees incremental impact of Rs 800 crore due to new labour codes.
• Core net interest margin was at 3.35%.

What Do Brokerages Say?

Bernstein maintained its 'outperform' rating on the stock with a target price of Rs 1,200, noting that the steady improvement in earnings per share growth continued in Q3. The brokerage said net interest margin expansion supported net interest income growth during the quarter, while one-offs in operating expenses and provisions largely offset each other, resulting in a balanced earnings outcome.

Kotak Securities reiterated its 'add' rating but trimmed its target price to Rs 1,050 from Rs 1,100. It said a steady recovery is underway at the bank, with margins improving off a low base and lower provisions driving earnings growth. However, Kotak cautioned that managing expectations remains key, as conflicting objectives could result in a slower-than-desired multiple re-rating.

Morgan Stanley continued with its 'overweight' stance and a target price of Rs 1,225, highlighting that the quarter saw higher NIMs, steady growth in CASA and retail segments, and improving loan growth. The brokerage said asset quality remains strong and operating leverage is beginning to play out. It also pointed out that the bank reiterated its guidance of loan growth above system levels starting FY27, despite an elevated credit-deposit ratio, and expects better core pre-provision operating profit growth ahead.

BofA maintained a 'buy. rating with a target price of Rs 1,175, describing Q3 as an inline quarter with management remaining focused on accelerating growth. The brokerage highlighted NIM expansion of 5 basis points, healthy fee growth and benign asset quality as positives, while flagging lagging deposit growth and elevated operating expenses as key misses.

Shares of the company closed 0.55% higher at Rs 930.55 apiece on the NSE, as compared to a 0.11% advance in the benchmark Nifty 50.

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