Why Is Bernstein Optimistic About HDFC Bank Despite Weak Deposit Growth?
About HDFC Bank and Bernstein’s Outlook
Bernstein has reiterated its Outperform rating on HDFC Bank, maintaining confidence in the lender’s long-term growth trajectory despite mixed quarterly trends. The brokerage has set a target price of ₹1,150 per share, indicating potential upside from the current market price of ₹965.15. The key highlight of the Q2 performance, according to Bernstein, is that the bank continues to deliver robust loan growth even in a subdued deposit environment.
🎯 Target Price: ₹1,150
📈 Current Market Price: ₹965.15
💰 Key Observations: Strong loan growth and weak deposit growth in Q2
📊 Interpretation: Improved loan momentum offsets deposit moderation
Bernstein believes that HDFC Bank’s Q2 loan expansion, driven by retail and corporate segments, signals improving demand and a positive turn for the sector. While deposit growth has remained tepid, it is expected to gradually recover as funding rates stabilize. Active traders often rely on Nifty Option Tips before quarterly results to gauge sector trends that could influence banking stocks.
Key Drivers Behind Bernstein’s Optimism
💡 Margins: Weaker deposit growth may temporarily support net interest margins (NIMs) in Q2.
💡 Balance Sheet: Healthy asset quality and prudent provisioning remain key strengths.
💡 Deposits: Despite slower growth, CASA mix remains stable, ensuring sufficient funding flexibility.
Bernstein’s analysis suggests that the improvement in loan growth is a positive sign in a growth-starved environment. With credit demand broadening and inflationary pressures easing, the bank is expected to maintain healthy spreads even as deposit competition normalizes over coming quarters.
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Sector and Valuation Context
📈 Sector Comparison: HDFC Bank trades at a premium to mid-tier banks due to its superior credit quality and efficiency metrics.
⚙️ Structural Drivers: Loan growth revival, improving cost-to-income ratio, and merger integration stability remain key valuation supports.
💹 Macro Outlook: Lower interest rate volatility and gradual recovery in deposit mobilization expected to improve balance sheet momentum.
Analysts at Bernstein emphasize that while deposit growth remains a watchpoint, it is unlikely to derail the medium-term story. The brokerage expects credit momentum to sustain, with NIMs benefiting temporarily from the slower pace of deposit accretion. As liquidity conditions ease post-Q2, deposit flows are likely to normalize, supporting a healthier funding mix going into FY26.
Investor Takeaway
Bernstein’s “Outperform” stance reflects conviction that HDFC Bank will continue to deliver superior risk-adjusted returns despite short-term headwinds. Strong lending momentum, improving credit quality, and steady profitability make it one of the more stable large-cap opportunities in India’s banking sector. Investors should, however, watch deposit mobilization trends and interest rate sensitivity in the coming quarters.
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SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
