The HDFC Bank share price has jumped 2% since it announced its Q1 earnings, and the gains in 2025 so far are close to 12%. Goldman Sachs has reiterated Buy on HDFC Bank with a target price of Rs 2,327 per share. This implies nearly 19% upside for the HDFC Bank share price from current levels on acceleration in earnings and growth.
This is based on their view that the bank is now ready to deliver on loan growth, in line with their guidance. The international brokerage house expects the NIM to adjust through the year and believes that “pick-up in loan growth is what will drive improvement in operating leverage.”
Goldman Sachs on HDFC Bank: Loan growth the big driver
According to Goldman Sachs, not only would improvement in loan growth drive operating leverage, but it is also expected to result in “better operating profit growth , about 20% in FY27 from 12% YoY growth in FY25. They also expect a rerating of the stock to “17x FY27 from 14x as visibility on return-on-assets and loan growth improves.”
Though the earnings estimates for FY26 and FY27 have been reduced by 2% and 1% respectively, the price target has been increased by 1%. This is primarily on the back of this improved visibility on loan growth.
Goldman Sachs on HDFC Bank: Asset quality healthy
HDFC Bank’s overall asset quality remains healthy after the Q1 results announcement. Though the slippage ratio in the agri business was higher on account of seasonal weakness at 1.5% QoQ.
However, when the numbers are adjusted after utilising gains from the HDB Financial stake sale, “the PCR is quite strong in our view,” added Goldman Sachs. This, along with the total buffer provisioning, which is at 140 bps of the loan book Vs 100 bps in Q4FY25, is seen as a positive for the bank’s books going forward.
Goldman Sachs on HDFC Bank: Growth and advances and deposits
Additionally, Goldman Sachs pointed out that advances from HDFC Bank grew 7% QoQ as the bank prioritised profitable growth in the quarter while consolidating loan-to-depoit ratio 95% as of Q1FY26.
The Bank’s deposit growth has just been higher QoQ, but it is also higher than the industry average. According to Goldman Sachs, this has been driven by “strong TD accretion in Q1FY26, CASA, meanwhile, dipped by 90 bps QoQ.
Goldman Sachs on HDFC Bank: Key risks
However, there are some risks too that one needs to keep in mind. According to Goldman Sachs, “delay in loan growth due to weak macro environment and execution challenges delaying improvement in productivity,” are key factors to watch.
The international brokerage house also pointed out that “aggressive competition in retail loans, especially mortgages from PSU Banks and further policy cuts impacting margins are key factors to watch.”