HDFC Bank shares will be in focus today after the bank’s Q1FY26 results. The margins slipped more than estimates but the management expects pick-up in H2FY26. While the asset quality remains best in class, the largest private sector bank announced the first ever bonus issue. With brokerages weighing in and investors eyeing today’s move, the key question is – Does the stock still offer upside from here?

In the June quarter, HDFC Bank reported a 12.2% rise in standalone net profit at Rs 18,155 crore, up from Rs 16,175 crore a year earlier. However, consolidated net profit fell 1.31% to Rs 16,258 crore from Rs 16,475 crore last year.

Let’s take a look at the brokerage call and what it suggests –

Nuvama on HDFC Bank: Maintains ‘Buy’ call, Ups target price

The brokerage Nuvama remains optimistic on HDFC Bank post Q1, maintaining a ‘Buy’ rating on the stock. In its latest report, the brokerage has raised its target price from Rs 2,195 to Rs 2,270, valuing the stock at 2.8x FY26E book value.

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According to the brokerage, the recent performance, while not without pressure, indicates stability and long-term strength. “Given a fortified buffer of provisions, likely pickup in growth, and stability in NIM in H2, we reiterate ‘BUY’,” the report said.

HDFC Bank: Margins under pressure, but buffer strength is a positive

The key concern for the quarter was the decline in margins. As per Nuvama’s report, “Reported NIM fell 19bp QoQ while core NIM, adjusted for tax refund of Rs 7bn in Q4FY25, fell 11bp QoQ.” The fall was steeper than expected, largely due to faster repricing of EBLR-linked loans and a slower decline in cost of funds.

“NIM was 6bp below our estimate largely due to faster repricing of EBLR and slower-than-expected fall in CoF,” Nuvama noted.

Still, despite the NIM hit, the bank’s core NII stayed flat, and core PPOP rose 8% YoY, this indicates a resilience in operating performance.

HDFC Bank: Asset quality holds up well

One of the key highlights of the quarter was the bank’s strong asset quality. Slippages rose due to agri stress, but overall credit quality remained best-in-class. As per the brokerage report, “Asset quality stayed best-in-class with higher QoQ slippage largely led by seasonal farm.”

Gross NPA stood at 1.4%, while the specific credit cost rose to 56bp from 48bp QoQ. However, excluding agri, credit cost was stable.

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The bank used most of its Rs 91 billion gain from the HDB Financial stake sale to build buffers, including Rs 90 billion as floating provisions and Rs 17 billion as contingency provisions leaving only Rs 8 billion as net gain.

“The total buffer of contingency plus floating provisions was a strong 1.4% of loans,” Nuvama added.

HDFC Bank Q1FY26 result snapshot

HDFC Bank’s Q1FY26 earnings reported a mixed picture. The bank’s consolidated net profit slipped 1.31% to Rs 16,258 crore compared to Rs 16,475 crore a year ago. However, on a standalone basis, net profit rose 12.2% to Rs 18,155 crore. Total income jumped to Rs 99,200 crore from Rs 83,701 crore.

Net Interest Income (NII) grew 5.4% year-on-year to Rs 31,438 crore, although net interest margin narrowed to 3.35% from 3.46%. The non-interest income surged to Rs 21,729.83 crore in Q1, largely due to transaction gains from the offer for sale of HDB Financial Services, which contributed Rs 9,128 crore. The bank reduced its stake in HDB from 94.32% to 74.19% by selling shares at Rs 740 apiece during the IPO.

HDFC Bank has also announced a 1:1 bonus share issue, effectively doubling shareholders equity holdings. In addition, the bank has declared a special interim dividend of Rs 5 per equity share, rewarding investors further.

HDFC Bank share performance

Over the past six months, HDFC Bank shares have delivered a solid return of 18%, while on a yearly basis, the stock has gained 19%. In 2025 so far, the stock has risen by nearly 10%. The bank’s market capitalisation currently stands at Rs 15 lakh crore. Its 52-week high is Rs 2,027.10, while the 52-week low is Rs 1,588.05.