HDFC Bank shares fell as much as 2% to ₹715 on the BSE on October 19, 2026, after the lender reported second-quarter profit growth of 4.6%. Brokerages retained positive recommendations, but their outlooks depend on a recovery in lending margins, control of funding costs and the bank’s leadership transition.
Key Takeaways
- Quarterly profit increased, but net interest margin on total assets narrowed by 10 basis points from June.
- Jefferies, Motilal Oswal, Emkay and Systematix retained positive recommendations despite the share-price decline.
- Analysts expect loan repricing to help margins, with higher foreign-currency deposit costs providing a partial offset.
Table of Contents
- HDFC Bank shares retreat despite higher quarterly profit
- Brokerages stay positive, with different recovery assumptions
- Funding costs complicate the margin outlook
- Leadership transition adds a near-term milestone
- Conclusion
HDFC Bank shares retreat despite higher quarterly profit
The bank reported net profit of ₹19,510 crore for the quarter ended September 30, 2026, compared with ₹18,641 crore a year earlier. Net interest income—the difference between interest earned and interest paid—rose 9.7% to ₹34,620 crore from ₹31,550 crore.
Separately, HDFC Bank’s consolidated financial results showed group net profit after minority interest of ₹20,700.03 crore, against ₹19,610.67 crore a year earlier. Those accounts include subsidiaries and are distinct from the bank-level profit figures. The board approved the consolidated results on October 17.
Net interest margin stood at 3.16% on total assets and 3.32% on interest-earning assets. The total-assets measure declined by 10 basis points from the preceding quarter, leaving margin recovery central to the brokerages’ investment cases.
The ₹715 quotation was an intraday low, not a confirmed closing price. The fall followed the results, but the available information does not establish which part of the announcement drove selling.
| Item | Details |
|---|---|
| Jefferies | Buy; target price ₹880 per share. |
| Motilal Oswal | Positive view; target price ₹925 per share. |
| Emkay | Buy; unchanged target price ₹1,050 per share. |
| Systematix | Buy; unchanged target price ₹875 per share. |
Brokerages stay positive, with different recovery assumptions
Jefferies maintained its Buy rating and ₹880 target price. It highlighted credit quality, citing gross slippages of 0.9% of loans from the past year, down from 1.2% a year earlier. Its forecasts nevertheless allow for higher credit costs in fiscal 2028–2029 as credit experience normalizes and the bank moves toward expected credit loss norms.
Motilal Oswal retained a positive view and a ₹925 target. It described the quarter as broadly in line with expectations, supported by business growth and operating profit, although provisions remained elevated.
Emkay and Systematix also maintained Buy ratings. Their targets, alongside those of Jefferies and Motilal Oswal, are analyst estimates rather than assured future trading prices.
Funding costs complicate the margin outlook
Systematix expects the recent 25-basis-point repo-rate increase to support repricing across the roughly 70% of the loan book carrying floating rates, with the benefit largely reflected by December 2026. It cautioned that higher costs from foreign currency non-resident bank deposits, known as FCNR(B) deposits, could offset part of that improvement.
Emkay similarly expects the rate increase to help offset the full-quarter impact of FCNR(B) funding costs, leaving third-quarter margins broadly stable. Management’s expectation that margins will improve remains an outlook, not a recovery already demonstrated in the September results.
Motilal Oswal put the credit-to-deposit ratio at 96% and forecast a gradual decline to about 93% by fiscal 2028 through calibrated balance-sheet management. That forecast makes the pace of lending relative to deposit growth another measure to monitor.
Leadership transition adds a near-term milestone
The bank’s new chief executive is scheduled to take charge on October 27. Its deputy managing director has also submitted a resignation, seeking to be relieved from December 31, 2026.
Jefferies identified clarity on senior appointments and management-team changes as important developments to watch. Emkay argued that the incoming leadership could reduce succession uncertainty, but any improvement in customer or investor confidence remains an expectation.
Conclusion
The next scheduled milestone is the new chief executive’s October 27 start. Beyond that transition, the third-quarter results will show whether loan repricing is beginning to offset funding costs and stabilize margins.
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