- Shares of HDFC Bank fell over 1% following Q1FY27 results due to margin concerns
- Net interest income rose 6.7% to Rs 33,534 crore despite lower net interest margins
- Provisions dropped 78.8% year-on-year but increased 17.2% sequentially to Rs 3,060 crore
Shares of HDFC Bank faced selling pressure and dropped in early trade on Tuesday, July 21, after announcing their April-June quarter results for fiscal 2026-27 (Q1FY27) last week. The decline in India's largest private lender's stock comes as the BSE Sensex and the NSE Nifty 50 traded little changed at 77,699 and 24,255 respectively while global cues remain mixed.
HDFC Bank disappointed D-Street in terms of net interest margins during the first quarter of current fiscal. Shares of HDFC Bank opened at Rs 769.15 against a previous close of Rs 777.60, extending losses to hit an intraday low of Rs 760.90 apiece on the NSE. Shares last traded 1.23% lower at Rs 768.05 apiece on the NSE. This compares to a fall of 0.04% in the Nifty 50 benchmark. The stock is down 23% on a year-to-date basis. The bank commands a market cap of Rs 11,83,592.02 crore.
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HDFC Bank Q1 Results
HDFC Bank's June-quarter earnings fell short of analysts' expectations as lower net interest margins and a sharp decline in other income weighed on operating profit, even as net profit rose on lower provisions. Brokerages said the bank continued to deliver healthy loan and deposit growth, but softer loan yields, margin pressure and muted fee income limited earnings growth. Net Interest Income (NII), the difference between interest earned and interest paid, rose 6.7% to Rs 33,534 crore from Rs 31,438 crore.
Provisions declined sharply on a year-on-year basis by 78.8% to Rs 3,060 crore from Rs 14,441 crore. However they rose sequentially by 17.2% to Rs 3,060 crore from Rs 2,610 crore. Asset quality worsened as compared to the preceding quarter with Gross NPA rising to 1.17% from 1.15% and Net NPA rising to 0.41% from 0.38%. Provisions dropped significantly by 78.8% to Rs 3,060 crore from Rs 14,441 crore on a year-on-year basis.
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Should you buy, sell, or hold?
Global brokerage Citi maintained a 'Buy' rating on the stock and cut its target price to Rs. 970 from Rs. 1,020, highlighting that June-quarter earnings missed expectations because of a 13-basis-point sequential decline in net interest margin. It also noted that fee income remained weak, while operating expenses and credit costs were broadly contained.
Domestic brokerage Kotak Securities maintained a 'Buy' call with a target price of Rs. 1,050 on the stock and said that the downside appears limited, although near-term triggers remain absent. Weak net interest margin performance resulted in muted earnings growth for HDFC Bank. The balance sheet transformation is visible, but the improvement has yet to translate into earnings.
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