HDFC Bank Share Price Target at Rs 1,022: Geojit Investments
Geojit Investments has reaffirmed its HOLD rating on HDFC Bank Limited, citing resilient earnings momentum, improving asset quality, and disciplined cost management, while flagging concerns around the bank’s elevated loan-to-deposit ratio. For Q3FY26, HDFC Bank delivered steady growth in net interest income and double-digit profit expansion, supported by lower funding costs and reduced provisioning. However, margin compression and balance-sheet constraints limit aggressive loan growth in the near term. Valuations remain reasonable at current levels, with Geojit rolling forward its target price to Rs. 1,022, implying moderate upside from the current market price.
Q3FY26 Performance Reflects Stability Amid Margin Pressures
HDFC Bank’s consolidated performance in Q3FY26 underscored its ability to generate consistent earnings even in a challenging interest-rate environment. Net interest income rose 8.2% year-on-year to Rs. 41,246 crore, driven by a reduction in the cost of funds to 4.5%, compared with 4.9% a year earlier. This benefit, however, was partially offset by net interest margin compression to 3.35%, reflecting competitive deposit pricing and a gradual shift in funding mix.
Total income increased 13.1% year-on-year to Rs. 126,927 crore, while operating discipline helped contain cost escalation. Pre-provisioning operating profit rose 9.5% to Rs. 30,582 crore, supported by productivity gains and improved operating leverage.
Profit Growth Supported by Lower Provisions
Reported profit after tax climbed 12.8% year-on-year to Rs. 20,691 crore, aided by an 8.5% decline in provisioning expenses. This moderation in credit costs reflects the bank’s continued emphasis on underwriting quality and granular portfolio management.
The cost-to-income ratio improved to 39.2%, down from 40.6% in the corresponding quarter last year, highlighting management’s focus on efficiency even as employee-related costs rose following revisions in labour regulations.
Asset Quality Trends Continue to Improve
HDFC Bank’s balance sheet quality strengthened further during the quarter. Gross NPAs declined to 1.2% from 1.4%, while net NPAs improved to 0.4%, underscoring the bank’s conservative credit stance.
This improvement reinforces confidence in the sustainability of earnings, particularly at a time when parts of the banking system remain exposed to sector-specific stress. The bank’s diversified loan book and retail-heavy exposure continue to provide a buffer against volatility.
Deposit and Loan Growth: A Mixed Picture
Deposit growth remained robust at 11.6% year-on-year, taking total deposits to Rs. 28.6 lakh crore. Growth was broad-based across savings, current, and term deposits, while the CASA ratio remained stable at 34%.
On the lending side, gross advances grew 11.9% year-on-year to Rs. 28.4 lakh crore. Retail loans expanded at a slower pace of 6.9%, while small and mid-market segments grew a healthy 17.2%. Corporate and wholesale advances rose 10.3%.
However, the loan-to-deposit ratio remains elevated, constraining the bank’s ability to accelerate credit growth without additional deposit mobilization. This structural factor remains a key overhang in the near term.
Network Expansion and Operating Scale Add Strategic Depth
As of December 31, 2025, HDFC Bank operated 9,616 branches and 21,176 ATMs across 4,170 locations, with nearly half of its branches located in semi-urban and rural markets. This expansive footprint supports long-term deposit accretion and strengthens the bank’s competitive positioning.
The scale advantage continues to be a core differentiator, particularly as financial inclusion deepens and digital banking adoption accelerates across India.
Valuation Reset Reflects Near-Term Constraints
Geojit has revised its estimates to reflect margin normalization and balance-sheet realities. Net interest income estimates for FY26E and FY27E have been trimmed, while earnings forecasts have been modestly upgraded due to lower credit costs.
The stock is currently valued at 2.1x FY28E book value, which Geojit considers fair given the bank’s return profile and growth outlook. While long-term fundamentals remain intact, the brokerage believes upside potential is capped in the absence of stronger deposit-led loan expansion.
Key Financial Snapshot (Consolidated)
| Metric | Q3FY26 | YoY Change |
|---|---|---|
| Net Interest Income | Rs. 41,246 cr | +8.2% |
| Total Income | Rs. 126,927 cr | +13.1% |
| Pre-Provision Profit | Rs. 30,582 cr | +9.5% |
| Reported PAT | Rs. 20,691 cr | +12.8% |
| Gross NPA | 1.2% | Improved |
| Net NPA | 0.4% | Improved |
Investment View: Quality Intact, Growth Moderated
Geojit believes HDFC Bank remains one of India’s strongest private-sector lenders, underpinned by a resilient retail franchise, superior asset quality, and disciplined capital allocation. Rate discipline, cost efficiency, and productivity gains continue to support profitability, even as margins face cyclical pressure.
That said, the elevated loan-to-deposit ratio limits near-term growth acceleration, warranting a cautious stance at current valuations.
Geojit maintains a HOLD rating with a 12-month target price of Rs. 1,022, implying an upside of around 10% from the current market price of Rs. 932. Long-term investors may continue to hold the stock, while incremental exposure may be better timed with clearer signs of deposit-led balance-sheet expansion.
