HDFC Bank shares gain after strongest loan growth in five years; Lender a 'consensus buy'

Shares of HDFC Bank Ltd. gained up to 2% on Monday, July 6, after the private sector lender reported a steady June quarter business update, with loan and deposit growth surpassing Street estimates.

The bank's gross advances rose 15.4% year-on-year to ₹30.61 lakh crore, marking the strongest loan growth in five quarters and comfortably beating analysts' estimate of around 12.1%.

Deposits grew 14.7% year-on-year to ₹31.70 lakh crore, ahead of the consensus expectation of 12%.

CASA deposits increased 9.4% year-on-year to ₹10.25 lakh crore, although the growth was lower than the Street's expectation of 11.1%.

Advances under management stood at ₹31.27 lakh crore, up 12.4% from a year ago.

Overall, the business update points to a stable and well-balanced quarter, with robust credit growth and deposit mobilisation offsetting the softer performance in CASA deposits.

Why Are Brokerages Positive On HDFC Bank?

Brokerage firm Bernstein maintained its "outperform" rating on the stock with a price target of ₹1,150.

The brokerage said that the provisional update portrayed a continued effort by the bank to strike a balance between delivering "healthy enough" loan growth, while keeping the Loan-Deposit (LDR) ratio largely unchanged, and possibly maintaining margins within a tight range.

HDFC Bank's CASA Deposits showed continued improvement with the gap between total deposits and CASA deposits narrowing further, Bernstein said.

"However, growth in average loan & deposit balances was lower than the period-end growth rates, suggesting that growth in HDFC Bank's Net Interest Income (NII) could lag the headline expansion in loans and deposits," the note said.

Jefferies has also maintained its "buy" rating on the stock with a price target of ₹1,050.

According to Jefferies, loan growth improvement by HDFC Bank reflects the sector's uptick and greater retention.

It sees loan and deposit growth for financial year 2027 at 13% and 15% respectively, as it expects the sector credit growth to taper.

All 47 analysts who have coverage on HDFC Bank have maintained its "buy" rating on the stock.

Shares of HDFC Bank are trading 1.8% higher on Monday at ₹815.7. The stock is still down 18% so far this year.