Whalesbook
ICICI Securities Recommends 'Buy' on HDFC Bank
ICICI Securities has initiated a 'Buy' rating on HDFC Bank, setting a new price target of ₹1,080. The bank reported a resilient Profit After Tax (PAT) for Q4FY26, growing 9% year-on-year and surpassing expectations by 3%. This result was boosted by controlled operating expenses, which increased only 5% year-on-year, and a reduced effective tax rate. The brokerage also highlighted multi-quarter low slippages (under 1%) and stable credit costs (35 basis points), along with consistent treasury and forex gains. Deposit growth saw a significant acceleration, up 9% quarter-on-quarter, pushing the Loan-to-Deposit Ratio below 95% and improving the bank's borrowing profile. Net Interest Margin held steady sequentially at 3.53%.
Mixed Signals in NII and Loan Growth
However, Net Interest Income (NII) growth presented a concern, with a modest 1.4% increase quarter-on-quarter that missed estimates by 1%. While loan growth accelerated significantly to 12% year-on-year (up from 5% in FY25), it still lags overall systemic expansion. The brokerage also noted a decrease in the Liquidity Coverage Ratio to 114% as a point of disappointment.
Valuation Attractiveness Drives Recommendation
ICICI Securities recognizes HDFC Bank's slower-than-systemic growth and current uncertainties. However, the brokerage sees significant appeal in the bank's historically low valuation multiples. The stock currently trades around 1.7 times and 1.5 times its core Adjusted Book Value for FY27 and FY28 respectively, levels not seen since the COVID-19 pandemic lows. This attractive valuation underpins the maintained 'Buy' recommendation, with the ₹1,080 target price valuing the core banking operations at approximately 2.1 times adjusted book value.