HDFC Bank stock supported by leadership clarity, stronger growth and NIM recovery
HDFC Bank Ltd.
BUY
₹715
₹703.8
₹785
9.79%
Investment View and Leadership Succession
Axis Securities' October 5, 2026 Axis PUNCH report identifies the resolution of HDFC Bank's leadership succession issue as a near-term positive for the stock. The RBI approved the appointment of Anup Bagchi as Managing Director and Chief Executive Officer effective October 27, 2026, for a three-year term.
Axis Securities believes the appointment removes the succession overhang and shifts investor focus towards execution, including retail growth, net interest margin improvement and strengthening the CASA franchise.
Credit Growth and Portfolio Strategy
HDFC Bank reported approximately 5% quarter-on-quarter credit growth in its Q2 FY27E provisional update, which Axis Securities describes as the best growth in nine quarters. The broker expects credit growth momentum to improve further.
Management aims to raise the retail portfolio's share of loans to 60% over the medium term from 52% in June 2026. Management remains optimistic about sustaining credit growth but is selective in the corporate segment because competition is intense and spreads are thin. Its corporate strategy is focused on deepening client relationships.
Margin Recovery and Funding Mix
Axis Securities expects net interest margin recovery to be a multi-quarter process. Margins have remained under pressure following the merger, while a reversal in the interest-rate cycle could benefit HDFC Bank because of its higher share of EBLR-linked loans.
The proportion of borrowings to overall assets declined to about 10.5% in June 2026 from 21% in September 2024, which should support margins. However, the broker expects immediate NIM pressure in Q2.
Deposit Mobilisation and CASA Outlook
Deposit mobilisation improved in Q2 FY27E, according to Axis Securities. CASA accretion remains muted, and the CASA ratio fell sharply to about 31.6% in Q2 FY27E from around 38% at the time of the merger.
Management has indicated a medium-term aspiration to restore the CASA ratio to its pre-merger level of 38% to 40%. It does not expect a sharp near-term recovery, with normalisation expected through calibrated customer acquisition, improving branch productivity and deeper engagement through the expanded distribution network.
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Profitability and Financial Estimates
Axis Securities expects operating efficiency, improvement in the operating-expense ratio, pristine asset quality and benign credit costs to drive expansion in return on assets. It forecasts RoA of 1.8% in FY27E and FY28E, improving to 1.9% in FY29E.
| Metric | FY26 | FY27E | FY28E | FY29E |
|---|---|---|---|---|
| Net interest income (Rs billion) | 1,287 | — | — | 1,919 |
| Profit after tax (Rs billion) | 747 | — | — | 1,128 |
| RoA | — | 1.8% | 1.8% | 1.9% |
| Estimated adjusted book value per share (Rs) | — | 398.7 | — | 501.2 |
| Implied price-to-adjusted-book-value multiple | — | 1.8 times | — | 1.4 times |
Recommendation, Valuation and Risks
Axis Securities maintains a BUY recommendation with a target price of Rs 785 per share, implying 10% upside from the report's CMP of Rs 715.
The key risks identified are slower replacement of borrowings by deposits and continued pressure on margins.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
