HDFC Bank shares fall 2% after Q2 results. What are Jefferies, Motilal Oswal analysts saying?
HDFC Bank shares fell up to 2% after the lender reported a 4.6% year-on-year rise in Q2 FY27 net profit to Rs 19,510 crore. Jefferies, Motilal Oswal, Systematix and Emkay retained positive ratings, citing margin recovery potential and leadership transition.
Shares of HDFC Bank, India’s largest private lender, slipped as much as 2% to Rs 715 on the BSE on Monday after it reported a net profit of Rs 19,510 crore for the second quarter of FY27, marking a 4.6% jump from Rs 18,641 crore posted in the same period last year.HDFC Bank’s net interest income (interest earned less interest expended) for the quarter ended September 30, 2026, rose 9.7% to Rs 34,620 crore from Rs 31,550 crore in the corresponding quarter last year.
Net interest margin stood at 3.16% on total assets and 3.32% on interest-earning assets.What should HDFC Bank shareholders do?Jefferies has maintained its ‘Buy’ rating on HDFC Bank with a target price of Rs 880, implying an upside of 21%. The brokerage said the bank’s credit quality remained robust, with gross slippages at 0.9% of loans from the past year, compared with 1.2% a year earlier. Jefferies has factored in some increase in credit costs for FY28-29 to reflect a normalisation in credit experience and the transition to expected credit loss (ECL) norms.
The brokerage has also revised its FY27-29 estimates to account for rate hikes and FCNR-B deposits.HDFC Bank's new CEO is set to take charge on October 27, while deputy managing director Kaizad has submitted his resignation, seeking to be relieved from December 31, 2026. Jefferies said clarity on new appointments and changes to the senior management team will be key to watch.The brokerage considers the bank's valuations reasonable at 1.4 times FY28 estimated adjusted price-to-book value and 11 times price-to-earnings.
It also expects profit before tax, excluding treasury operations, to grow at a compound annual growth rate of 13% over FY26-29.Live EventsMotilal Oswal has maintained its positive view on HDFC Bank, with a target price of Rs 925, implying an upside of 27%. The brokerage said the bank delivered a largely in-line quarter, supported by healthy business growth and strong operating profit, although provisions remained elevated.Net interest margin (NIM) on total assets contracted by 10 bps QoQ to 3.16%, but the bank expects margins to improve from here.
Loan growth was driven by the SME segment, while retail lending gained momentum. Deposit growth also remained healthy, with FCNR(B) deposit mobilisation pushing the credit-to-deposit (CD) ratio up to 96%. Motilal Oswal expects the ratio to gradually decline to around 93% by FY28 through calibrated balance sheet management.Emkay has reiterated its ‘Buy’ rating on HDFC Bank with an unchanged target price of Rs 1,050, valuing the bank at 2 times its September 2028 estimated adjusted book value and assigning Rs 121 per share to its subsidiaries.
The brokerage expects the recent rate hike to support margins, partly offsetting the full-quarter impact of FCNR(B) deposits, keeping margins broadly stable in the third quarter.The domestic brokerage believes the appointment of a new managing director and CEO should bring an end to the prolonged succession uncertainty and help restore customer and investor confidence. Following the stock's sustained underperformance, the brokerage sees valuations as attractive, with scope for a sustained re-rating as the new leadership makes progress on key priorities and geopolitical uncertainties ease.
This could also help moderate or reverse foreign portfolio investor (FPI) outflows.Systematix has maintained its ‘Buy’ rating on HDFC Bank with an unchanged target price of Rs 875. The brokerage values the standalone bank at 1.7 times its FY28 estimated adjusted book value per share of Rs 435 and assigns Rs 119 per share to its subsidiaries and associates.Retail loans grew 6.5% QoQ and 11.7% YoY, while business banking advances rose 9% QoQ and 28% YoY.
Management expects retail and MSME lending momentum to sustain. The brokerage believes the quarter may have marked the bottom of the current margin cycle, with the recent 25 bps repo rate hike expected to support recovery.The benefit is expected to accrue to the 70% of the loan book comprising floating-rate loans, with the impact largely reflected by December 2026. However, gains from loan repricing may be partly offset by higher funding costs from FCNR(B) deposits.
The bank’s average liquidity coverage ratio (LCR) stood at 113% during the quarter.Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication.
The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.(You can now subscribe to our ETMarkets WhatsApp channel)
