HDFC Bank shares get a downgrade from Investec after Q1 results, no more a 'consensus buy'

Brokerage firm Investec has downgraded shares of India's private sector lender HDFC Bank Ltd. after its first quarter results that were reported on Saturday, July 18. The numbers missed street expectations across most parameters.

Investec downgraded HDFC Bank to "hold" from its earlier rating of "buy" and revised its price target to ₹920 from ₹915 earlier. The revised price target implies an upside potential of 12% from Friday's closing levels.

Calling HDFC Bank's quarter as "weak", Investec said that retail loan growth was muted, credit costs rose due to seasonal factors and also highlighted that the management did not provide any clarity on the CEO succession plans.

As a result of the weak quarter, Investec has cut HDFC Bank's Profit After Tax (PAT) estimates by 1% and 2% over financial year 2027 and 2028 respectively to reflect a weaker core income growth, and are also building in a Return on Equity (RoE) of 13% to 13.5% over the next two years.

"Given the continued margin pressure, a wholesale-led growth mix and limited upside, we downgrade the stock to HOLD," Investec wrote in its note.

What once was a "consensus buy", HDFC Bank now has 46 out of the 47 analysts tracking the stock who have a "buy" rating on it. This is the first downgrade the stock has received after four months.

HDFC Bank's results for the June quarter were below analyst expectations with Net Interest Margins (NIMs) at record low levels of 3.26%.

Ex-the agri slippages, gross NPAs were flat, while on a sequential basis, they stood at 1.17% from 1.15% respectively.

Bernstein Retains Its Optimism

Bernstein has maintained its "outperform" rating on HDFC Bank with a price target of ₹1,150.

It said that margin pressures tempered growth in its core income despite a robust loan and deposit growth update.

"Against this backdrop, bank once again leaned on operating efficiency to protect profitability, while stable asset quality provided an additional cushion," the brokerage said, adding that the franchise remains on a slow normalization path as earnings growth remains constrained by ongoing margin headwinds.

Nomura Retains Its Value

Nomura has also maintained its "buy" rating on HDFC Bank with a price target of ₹950, stating that it continues to value the lender at 1.9 times its March 2028 forward book value per share.

Shares of HDFC Bank ended at the day's high on Friday before the results announcement, at ₹820.8, with gains of 1.5%.