Bullish or bearish on HDFC Bank: brokerages divided; BoFA, Morgan Stanley, Bernstein bullish, Macquarie sees 37% upside

HDFC Bank’s Q3FY25 performance has elicited mixed responses from brokerages, reflecting both optimism about its long-term potential and caution about near-term challenges. While some highlight the bank’s steady fundamentals, others express concerns over loan growth and asset quality. Here’s what the brokerages are saying:

Brokerage Ratings and Target Prices

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Brokerage Rating Target Price (₹) Potential Upside/Downside from CMP (₹1,674)
Bernstein Outperform 2,300 +37%
CLSA Hold 1,785 +7%
Investec Hold 1,650 -1%
Bank of America (BoFA) Buy 2,020 +21%
Morgan Stanley (MS) Overweight 1,975 +18%
Macquarie Outperform 2,300 +37%
HSBC Buy 1,980 +18%
Motilal Oswal (MOSL) Buy 2,050 +22%
Nuvama Buy 1,950 +16%

Detailed Brokerage Insights

Bernstein: Outperform, Target ₹2,300

  • Positives: Decent NII growth, strong core fee income, and a 12% YoY growth in profit before tax, providing confidence in future performance.
  • Bernstein expects the bank to return to mid-teens EPS growth trajectory in the coming quarters.

CLSA: Hold, Target ₹1,785

  • Key Observations: Q3 profit before tax was in line, but loan growth was curtailed to 3% YoY, with the Loan Deposit Ratio (LDR) at 98%.
  • CLSA expects the LDR to normalize at 90% only by FY27.

Investec: Hold, Target ₹1,650

  • Concerns: Slight miss on NII and seasonal increases in agricultural slippages.
  • Investec believes it will take at least two years for HDFC Bank to stabilize its balance sheet.

BoFA: Buy, Target ₹2,020

  • Positives: No surprises in Q3, with the LDR nearing normalization in three quarters.
  • BoFA highlights early synergies in liability cross-sells and views current valuations at 2x P/B as attractive.

Morgan Stanley: Overweight, Target ₹1,975

  • Takeaways: Strong asset quality, steady franchise, and 18% YoY growth in fee income.
  • MS expects loan growth to accelerate once the LDR normalizes by H1FY26.

Macquarie: Outperform, Target ₹2,300

  • Observations: Decent results in a tough macro environment, though agri slippages led to slightly higher credit costs.
  • The bank expects NIM to improve as the macro environment recovers.

HSBC: Buy, Target ₹1,980

  • Insights: Q3 results were in line, with stable asset quality and minor NIM compression of 3bps QoQ.
  • HSBC has reduced FY26-27 EPS estimates by 4-5% to reflect slower loan growth.

Motilal Oswal: Buy, Target ₹2,050

  • Highlights: In-line earnings, with a gradual retirement of high-cost borrowings expected to improve return ratios in FY26.
  • MOSL sees RoA/RoE of 1.8%/13.9% for FY26.

Nuvama: Buy, Target ₹1,950

  • Positives: Better-than-expected slippage metrics, improved LDR, and strong deposit market share gains.
  • Agri slippages grew 13% QoQ, but the total lagged slippage ratio at 1.4% remains the lowest among private peers.

Conclusion: Bullish Sentiment Dominates

While concerns over asset quality, loan growth, and seasonal slippages exist, most brokerages remain optimistic about HDFC Bank’s long-term prospects. Target prices range from ₹1,650 (Investec) to ₹2,300 (Bernstein and Macquarie), offering upside potential of up to 37% from the current market price of ₹1,674.

HDFC Bank’s leadership in the private banking sector, coupled with improving NIMs and fee income growth, makes it a solid pick for investors with a medium-to-long-term outlook.

Disclaimer: This article is for informational purposes only and does not constitute financial advice.