A major private-sector lender has come back into the spotlight after brokerage firm Emkay shared a review of its growth plans, margins, and competitive position. The brokerage house has given a 12-month target price of Rs 1,225 for HDFC Bank. This implies around 23.7% upside from current levels.
Let’s take a look at the key reasons why the brokerage is bullish on HDFC Bank and its investment rationale-
Emkay on HDFC Bank: Management indicates a shift in momentum
According to the brokerage report, Emkay met Deputy Managing Director of HDFC Bank, Kaizad Bharucha and Head of Investor Relations Bhavin Lakhpatwala to understand the bank’s strategy during a period of regulatory easing and rising competition.
The management told the brokerage that credit growth has improved sharply after a slow patch. As per the report, “HDFC Bank’s credit growth trajectory has surged, from a low of 3% in Q3FY25 to 10% in Q2FY26.”
The bank expects this trend to continue, and the brokerage noted that it could even beat the industry’s growth in the next financial year.
Emkay on HDFC Bank: Why loan growth matters now
The bank’s merger-related challenges had slowed growth for a few quarters. But according to Emkay’s report, this drag is now fading. The bank is seeing traction across segments such as retail loans, micro-small-and-medium enterprises (MSME) and corporate lending.
The report highlighted that mortgage (home loan) growth remains moderate at 7%, but the bank expects this segment to pick up and help cross-sell other products. The brokerage noted, “Growth impulse across the corporate, retail, and SME space seems to be improving.”
Emkay on HDFC Bank: Margins under near-term pressure but may recover later
Nearly 70% of the bank’s loans are on floating rates, meaning interest charges move with policy rate cycles. With rate cuts underway, margins may remain tight for some time. However, Emkay believes this could gradually reverse.
The report added, “Margin could remain under pressure in the near term amid ongoing rate cuts, although it should improve from FY27E.”
Several factors may support this improvement from repricing of deposits to lower reliance on borrowings and a gradual increase in cheaper current account and savings account (CASA) deposits.
Emkay on HDFC Bank: Deposit trends show early signs of stability
The bank faced deposit-market pressure last year as competition increased and customers shifted to fixed deposits offering higher rates. But according to Emkay, deposit flows are stabilising.
The brokerage mentioned that the bank is gaining back share and expects savings balances to improve. The report noted the bank is reducing borrowings from 13% toward 6-7%, which may ease funding costs in coming years.
Emkay on HDFC Bank: A look at operating costs and investments
Following the merger and a Reserve Bank of India (RBI) technology-related embargo, the bank increased its investment in digital and physical infrastructure. This pushed its cost-to-income ratio above 39-40%.
But Emkay believes operating costs may become more predictable ahead. The bank expects support from rising net interest income (NII) and fee income.
The report added, “Better core profitability CAGR of 16% over FY25-28E” is possible if costs remain contained and loan growth stays firm.
Emkay on HDFC Bank: Asset quality outlook and buffers
Emkay also reviewed the bank’s approach to unsecured loans such as personal loans and credit cards. Growth has been limited due to the broader industry-wide rise in delinquencies, but underwriting standards remain tight.
The brokerage highlighted, “Strong contingent/floating provision buffer (Rs 381bn/1.4% of loans) should help the bank tide over any ECL impact.”
Overall the positive recommendation from HDFC Bank is hinging on key factors like asset quality improving, uptick in credit card spending share and expectation of acceleration in personal loan growth from FY27, helping margins as the loan mix shifts again.
