HDFC Bank Q4FY26: PAT Rs 19,220 crore; TP ₹1,080

What stood out in HDFC Bank’s Q4FY26 print

HDFC Bank reported a resilient Q4FY26 at a time when the operating backdrop remains uncertain. The quarter came soon after the sudden exit of the chairman, and the broader macro environment was described as tough. Even so, the bank posted multi-quarter low slippages of under 1%, along with controlled credit costs. The earnings mix also benefited from contained operating expenses and a lower tax rate, supporting profitability. These elements helped the bank deliver a performance that was modestly ahead of expectations on profit.

Profitability: PAT beat, helped by opex and tax

Profit after tax (PAT) for Q4FY26 stood at INR 192.2 billion, which translates to Rs 19,220 crore, up 9% year-on-year. The PAT was described as a 3% beat versus estimates, aided by operating expense growth of 5% year-on-year and a lower tax rate. The operating leverage signal is important because it came despite growth headwinds flagged in other parts of the quarter. While profit held up, the quarter also highlighted that core income momentum was not as strong as the headline PAT might suggest.

Asset quality: slippages and credit costs stayed benign

HDFC Bank reported slippages at a multi-quarter low, below 1%. Credit costs were reported at 35 basis points, also indicating stability. The quarter was further supported by stable treasury and forex gains. Together, these factors reduced downside pressure on earnings during a period when investors have been sensitive to asset quality signals across lenders.

Deposits improved: growth picked up and LDR moved below 95%

The deposit franchise showed a stronger quarter, with deposit growth jumping 9% quarter-on-quarter. The bank’s loan-to-deposit ratio (LDR) improved to below 95%, an important indicator given the sector’s focus on liability strength. The share of borrowings also improved, suggesting a better funding mix. These data points are likely to be closely watched because funding constraints have been one of the key reasons cited by the market when comparing bank-specific growth to system growth.

Margins and core income: NIM steady, NII growth weak

Net interest margin (NIM) was stable quarter-on-quarter at 3.53%. However, net interest income (NII) grew only 1.4% quarter-on-quarter, which was described as a 1% miss versus expectations. The combination of stable NIM but weak NII growth points to volume or mix dynamics rather than pricing pressure. The commentary flagged sluggish NII as one of the disappointments in the quarter.

Loan growth accelerated, but still lags the system

Loan growth accelerated to 12% year-on-year, a clear improvement compared with 5% year-on-year growth in FY25. Even with that step-up, the bank’s growth was still described as slower than systemic growth. Retail loan growth was also cited as sluggish. This gap versus the system is a central part of the near-term investor debate, especially as the bank balances growth with funding and liquidity metrics.

Liquidity: LCR dipped to 114%

The liquidity coverage ratio (LCR) dipped further to 114%, and this was highlighted as another disappointment. Liquidity metrics have become a key monitorable because they influence balance sheet flexibility, especially when deposit growth is a sector-wide constraint. While the quarter showed improvement in deposits and LDR, the lower LCR suggests there are still moving parts in liquidity management.

ICICI Securities view: Buy maintained, target revised to ₹1,080

ICICI Securities initiated a Buy rating on HDFC Bank with a price target of ₹1,080, acknowledging slower-than-systemic growth and current uncertainties. The brokerage flagged the appeal of historically low valuation multiples, noting the stock trades at around 1.7 times and 1.5 times FY27 and FY28 estimated core adjusted book value (core ABV), comparable to Covid-low valuations. The revised target price of ₹1,080 was cut from ₹1,120 earlier, with the core banking business valued at around 2.1 times (versus around 2.2 times earlier). A separate reference in market commentary also mentioned a reduced target of ₹975 while maintaining a Buy, underscoring that target prices have been adjusted amid uncertainty even as positive ratings remain in place.

Key numbers at a glance

Market impact: what the quarter changes for investors

The quarter reinforced that HDFC Bank’s near-term story is a mix of stability and slower growth. On one side, low slippages, contained credit costs, and stable NIM support confidence in risk and margin management. On the other, weak NII growth, sluggish retail momentum, and the dip in LCR add caution for investors focused on the pace of recovery in core income growth. Deposit acceleration and an improved LDR provide evidence of balance sheet normalization, which is a key requirement for faster loan growth. The brokerage stance in the provided notes leans on valuation support rather than a sharp change in near-term growth expectations.

Why the valuation debate matters

ICICI Securities anchored its Buy call on the stock’s valuation multiples, citing trading levels of about 1.7 times and 1.5 times FY27 and FY28 estimated core ABV. It also valued the core banking business at about 2.1 times adjusted book value at the revised target price, compared with about 2.2 times earlier. The combination of a lower target price and a maintained Buy indicates the brokerage is factoring in uncertainty while still viewing current valuations as compelling relative to history.

Conclusion

HDFC Bank’s Q4FY26 results showed stable asset quality and margins, a notable pickup in deposits, and a profit outcome supported by controlled opex and a lower tax rate. The weak NII growth and the lower LCR remained key watchpoints. ICICI Securities maintained a Buy rating while revising its target price to ₹1,080 from ₹1,120 earlier, with its view driven by historically low valuation multiples. Going forward, investors are likely to track whether deposit momentum sustains and whether core income growth improves from the subdued Q4 run rate.