HDFC Bank's Operational Income Set To Improve, Says Goldman Sachs — Stock Gets 15% Upside Target

HDFC Bank Ltd.'s operational income, denoted in terms of PPOP (pre-provision operating profit), is set to grow next financial year as liquidity eases and the loan-to-deposit ratio consolidates, according to Goldman Sachs.

Analysts at the brokerage listed five factors that gave it confidence to place a 'buy' rating on the HDFC Bank stock, with a 12-month price target of Rs 2,090. The target implies a 14.7% potential upside to the previous close.

The stock has outperformed the benchmark Nifty 50 over the last six months as EPS cuts have started to bottom out by consensus, regulatory measures eased, and relative preference improved for the banking space amid the slowdown in other sectors and valuations, Goldman Sachs said in a note.

Six-month HDFC Bank stock performance compared to Nifty 50.

Besides, investors are eyeing the private lender's loan growth trajectory into FY26, pressure on net interest margin due to rate cuts, and PPOP-return on asset trajectory given divergent views on the street.

HDFC Bank is geared up to accelerate PPOP growth from 5% over the last four quarters to 13% over the next four quarters, analysts said. This is now possible as the LD ratio, a financial metric that compares a bank's total loans to its total deposits to gauge deposit composition within total loans, has declined from a peak of 111% to 98%.

Moreover, market share gains in deposits, loan growth in core segments such as retail and commercial and rural banking, accelerating market share gains in credit cards business and stable asset quality are contributing to analyst optimisim.

HDFC Bank share price was trading 0.24% lower at Rs 1,816 apiece by 12:20 p.m. The benchmark NSE Nifty 50 was down 0.3%.

The stock has risen 27% in the last 12 months and 2.5% on a year-to-date basis. The relative strength index was at 72.

Of the 48 analysts tracking HDFC Bank, 42 have a 'buy' rating on the stock and six recommend a 'hold', according to Bloomberg data. The average of 12-month analysts' price target implies a potential upside of 10%.