CLSA has maintained its outperform rating on HDFC Bank with a target price of ₹1,200 per share after the lender reported a stronger-than-expected Q3FY26 performance, led by margin expansion and lower credit costs.
The brokerage noted that profit before tax came in 5% above its estimate, driven by in-line pre-provision operating profit (PPOP) and a meaningful moderation in credit costs. Adjusting for non-core items such as the labour code impact and treasury gains, core PPOP was still 2% above estimates, supported by better net interest margins and continued tight cost control.
CLSA highlighted that net interest margins expanded by 8 basis points sequentially, benefiting from lower deposit costs and some relief from the CRR cut. This margin improvement was a key positive during the quarter, particularly in an environment where funding costs remain a sector-wide concern.
On the growth front, gross advances grew 2.7% quarter-on-quarter, which was slightly below CLSA’s estimate of 4%. Deposit growth also moderated to 12% year-on-year, as the bank consciously curtailed wholesale deposit mobilisation to protect margins. However, CLSA pointed out that average CASA balances showed an improvement during the quarter, indicating some stabilisation in the funding mix.
Overall, CLSA believes HDFC Bank’s margin discipline and cost control continue to underpin earnings resilience, even as growth remains measured.
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