UBS has maintained its Buy rating on HDFC Bank with a target price of Rs 1,000, saying resolution of the bank's leadership uncertainty could drive a near-term re-rating in the stock.
HDFC Bank has submitted the names of two candidates to the Reserve Bank of India (RBI) for the next Managing Director and CEO, with clarity on the successor expected soon. The current CEO Sashidhar Jagdishan is set to step down at the end of October.
According to UBS, resolution of the leadership overhang could act as a key near-term catalyst for the stock.
UBS expects HDFC Bank's loan growth to improve further after early signs of recovery. Loan growth stood at 15.6% in first quarter of fiscal 2027, and the brokerage expects it to move towards 15% over FY27-29E. The bank's loan growth has already shown improvement, with first quarter 2027 advances growth around 15.5% according to industry data.
UBS also expects margins to improve towards 3.5%, supported by a gradual shift towards a higher retail loan mix.
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The brokerage expects HDFC Bank's return on assets (RoA) to improve to 1.9% in FY27/FY28E as growth and margins recover. UBS also sees scope for future productivity gains from the bank's branch network. Around 42% of HDFC Bank's branches are less than five years old, providing room for these newer branches to mature and contribute more meaningfully to the bank's business.
On the liability side, UBS forecasts deposit CAGR of 15.5% over FY26-28E.
UBS said HDFC Bank's valuation remains supportive, with the stock trading at around 1.4 times fiscal 2028E price-to-book value (P/BV). The bank is also trading at a 33% discount to its own long-term average P/BV, according to UBS.
HDFC Bank trades at a 30% discount to ICICI Bank on the same metric, with UBS noting that this represents the widest-ever discount between the two banks.
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