Jefferies has maintained its Buy rating on HDFC Bank, setting a target price of Rs 1,890, implying a 12% upside from the current market price of Rs 1,689. The brokerage highlighted that HDFC Bank is aiming to lower its Loan-to-Deposit Ratio (LDR) to 85-90% over the next three years, which could be achieved with a deposit CAGR of 15% and a slowing loan CAGR of 11%.
Jefferies noted that branch expansion could help the bank gain deposit market share, while loan growth is expected to remain at or slightly below the sector level. Additionally, the bank has scope to lower funding costs, which could lift Net Interest Margins (NIM). Slower growth in unsecured loans is expected to keep credit costs under control.
The brokerage also trimmed its earnings estimates by 4-6% to factor in the slower loan growth but stated that Priority Sector Lending (PSL) compliance is unlikely to have a significant impact on profits.
Disclaimer: Stock investments are subject to market risks. Readers are advised to seek independent financial advice before making any investment decisions.
