UBS raises HDFC Bank stock price target to INR2,250

On Monday, UBS analyst Vishal Goyal updated the financial outlook for HDFC Bank Ltd (NSE:HDBK) (HDFCB:IN) (NYSE: HDB), increasing the price target to INR2,250 from INR2,160, while reiterating a Buy rating for the stock. The bank, currently trading near its 52-week high of $72.34 with a market capitalization of $172.2 billion, maintains a strong Buy consensus among analysts with an average rating of 1.25 out of 5. InvestingPro data reveals 10+ additional analyst insights and key metrics available for subscribers. The revision follows HDFC Bank’s recent quarterly financial results, which revealed a profit after tax (PAT) of Rs176.2 billion, slightly surpassing UBS estimates. This performance was bolstered by a 10% year-over-year increase in net interest income (NII) and lower credit costs.

The bank’s core pre-provision operating profit (PPOP) experienced a significant growth of approximately 20.6% year-over-year, exceeding UBS’s expectations. This growth was attributed to reduced operating expenses. This performance aligns with the bank’s impressive revenue growth of 19.23% over the last twelve months, according to InvestingPro data. Additionally, HDFC Bank saw an expansion in net interest margins (NIMs) by 11 basis points quarter-over-quarter, reaching 3.54%, or 3.46% excluding the interest on an income tax refund.

Loan yields saw a slight improvement, while the cost of funds remained stable quarter-over-quarter. The bank reported a consistent credit cost of around 50 basis points and a reduction in slippages to 1.2% (annualized), down from 1.4% in the previous quarter. Despite anticipated pressure on NIMs due to repo rate cuts in the fiscal year 2026, UBS forecasts a gradual improvement in margins in fiscal year 2027, driven by repricing of liabilities and a shift in the loan mix towards higher-yielding options.

UBS analysts suggest that trends in deposit growth and NIMs will be crucial for further re-rating of the stock. They view the risk-reward balance as favorable, noting the stock is trading at approximately 2.1 times the estimated price-to-book value (P/BV) for September 2026 for the core bank, which is about a 15% discount compared to ICICI Bank’s valuations. Current InvestingPro metrics show the stock trading at a P/E ratio of 20.76x, with a price-to-book ratio of 2.8x. For deeper insights into HDFC Bank’s valuation metrics and comprehensive analysis, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers. The firm maintains a positive outlook on HDFC Bank’s stock, citing a more favorable asset quality and PPOP forecast in the medium term.

In other recent news, HDFC Bank’s third-quarter financial results have garnered attention with a pre-tax profit of INR220 billion, marking a 12% increase year-over-year and aligning with analyst estimates. The bank maintained a stable return on assets at 1.8% and saw a robust 16% year-over-year growth in deposits, despite a slight 3 basis points drop in net interest margin. Nomura has upgraded HDFC Bank’s stock rating from Neutral to Buy, increasing the price target to INR1,920 from INR1,780, citing the bank’s strong performance in deposits and asset quality. The bank experienced a slight increase in slippages due to seasonal factors, but overall asset quality remained stable. Credit cost was consistent with expectations, aided by a significant reduction in the provision coverage ratio and a contingent provision write-back. Despite revising loan and deposit growth estimates downward for fiscal years 2026-27, Nomura expressed confidence in HDFC Bank’s asset quality relative to peers. The analyst suggested that easing system liquidity could further enhance the bank’s deposit growth. These developments reflect confidence in HDFC Bank’s ability to navigate challenging economic conditions while maintaining strong financial metrics.

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