Brokerage firm Prabhudas Lilladher has kept its 'Buy' rating on HDFC Bank with a price target of Rs 950. While the bank reported slightly lower profit margins due to higher provisions for aging assets, analysts expect a recovery driven by a shift toward retail and SME lending.
Brokerage firm Prabhudas Lilladher has reiterated its 'Buy' rating for HDFC Bank, setting a target price of Rs 950 per share. The assessment comes as the bank balances steady core performance with the need to navigate margin pressures caused by its existing loan portfolio.
During the recent period, HDFC Bank's Net Interest Margins (NIM)—a key indicator of profitability from lending—dipped by 8 basis points to 3.32%. This decline was largely driven by higher provisions, which is the money the bank must set aside to cover potential losses from loans that are aging or showing signs of stress. While the bank's core operating profit was in line with market expectations, the ongoing need to buffer against these aging assets has put pressure on the bottom line.
A key area for investors to track is the bank's change in lending strategy. HDFC Bank is currently pivoting its focus toward retail and Small and Medium Enterprise (SME) lending, aiming to reduce its reliance on corporate and home loans. The goal of this shift is to improve margins, as retail and SME loans typically carry higher interest rates compared to large corporate loans. Management has expressed optimism, suggesting that margins may have bottomed out and could begin to improve starting next quarter.
Despite this, competitive dynamics remain intense. When adjusted for specific accounts, HDFC Bank reported a loan growth of 3.4% on a quarter-on-quarter basis. This pace was slower than the growth rates recorded by major competitors such as ICICI Bank and Axis Bank, which have been expanding their loan books more rapidly in recent periods. This difference in growth speed is a reminder of the competitive environment the bank is navigating.
Institutional investors continue to monitor the bank's leadership transition and strategic direction under Anup Bagchi. Prabhudas Lilladher has valued the stock at 1.9 times the September 2026 core Adjusted Book Value to arrive at its target price. Moving forward, shareholders may watch for signs that the bank's new retail-focused strategy is successfully boosting loan growth and protecting margins, while also observing whether the impact of provisions on aging assets begins to stabilize.