HDFC Bank shares fall 5% after Q1 results. Should you buy, sell or hold the stock?

Shares of HDFC Bank declined 5% to Rs 780 on the BSE on Monday after India's largest private sector lender reported a mere 5% year-on-year (YoY) rise in standalone net profit for the April-June quarter of FY27.

The bank posted a standalone net profit of Rs 19,060 crore for the quarter, compared with Rs 18,155 crore in the corresponding period last year. Net interest income (NII), which reflects the difference between interest earned and interest paid, increased 7% YoY to Rs 33,534 crore from Rs 31,438 crore a year earlier.

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HDFC Bank share price: What are experts saying?

Motilal Oswal has reiterated its Buy rating on HDFC Bank with a target price of Rs 2,050, implying an upside of around 28%. The brokerage said the bank reported a largely in-line quarter, supported by healthy business growth and lower provisions, although net interest margin (NIM) remained the key disappointment, contracting 12 basis points QoQ to 3.26%. Loan growth was led by the SME and corporate segments, while retail lending remained relatively subdued.


It believes NIM has meaningful room for improvement as Rs 400-500 billion of high-cost borrowings mature over the next two years, lowering funding costs and supporting profitability. Factoring this in, Motilal Oswal has cut its FY27 and FY28 earnings estimates by 2% each and expects HDFC Bank to deliver an FY28E RoA/RoE of 1.84%/14.7%.

JM Financial has maintained its Add rating on HDFC Bank with a revised target price of Rs 900, implying an upside of around 10%. The brokerage said the bank's liquidity coverage ratio (LCR) of 115% and a credit-deposit ratio of around 96% limit its ability to accelerate loan growth. As a result, loan growth has been driven by the wholesale portfolio, which has weighed on net interest margins (NIM).

However, JM Financial remains constructive on the bank's medium-term margin outlook, expecting NIM to improve as high-cost borrowings gradually run off. It also believes HDFC Bank's strong asset quality will keep credit costs under control. The brokerage expects the bank to deliver 15% loan CAGR and 14% EPS CAGR over FY26-28E, translating into an average RoA of 1.8% and RoE of 14% over FY27-28E.

HDFC Bank Q1 highlights

On the asset quality front, gross non-performing assets (NPA) declined more than 3% YoY to Rs 35,846 crore. Net NPA, however, edged up to Rs 12,357 crore during the quarter. The gross NPA ratio stood at 1.17%, compared with 1.15% in Q4 FY26 and 1.4% in Q1 FY26. The net NPA ratio came in at 0.41%, versus 0.38% in the previous quarter and 0.47% in the corresponding quarter a year ago.

Provisions declined sharply by 79% YoY to Rs 3,060 crore in the first quarter of FY27. On a sequential basis, however, provisions were 17% higher than Rs 2,610 crore reported in Q4 FY26. The bank's Capital Adequacy Ratio stood at 19.57%, compared with 19.88% in Q1 FY26 and 19.71% in Q4 FY26.

Also read: Q1 earnings begin on a strong note as banks fuel double-digit growth

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)