UBS has maintained its Buy rating on HDFC Bank with a target price of ₹1,000, saying resolution of the bank's leadership uncertainty could drive a near-term re-rating in the stock. The brokerage expects HDFC Bank's loan growth to improve further after early signs of recovery, with loan growth standing at 15.6% in first quarter of fiscal 2027 and expected to move towards 15% over FY27-29E. UBS also expects margins to improve towards 3.5%, supported by a gradual shift towards a higher retail loan mix. The brokerage expects HDFC Bank's return on assets (RoA) to improve to 1.9% in FY27/FY28E as growth and margins recover, with scope for future productivity gains from the bank's branch network.
HDFC Bank has formally begun its CEO succession process by submitting two candidates to the RBI for the top leadership role, with current CEO Sashidhar Jagdishan's tenure ending on October 26, 2026. According to The Economic Times, the bank's board had tried to persuade Jagdishan to continue, but he remained firm on his decision not to seek re-appointment. The lender's shares rose 3% to ₹727 on Tuesday following the development, though the bank has not disclosed the names of the two candidates. Kaizad Bharucha, Deputy Managing Director, and an external candidate are reportedly on the list, with ICICI Prudential Life CEO Anup Bagchi and Citi India CEO K Balasubramanian being considered for the external slot. However, the leadership transition is creating a wait-and-watch sentiment among institutional investors, as investors were willing to pay more for HDFC Bank when they had greater confidence in its growth, profitability and leadership.
Despite HDFC Bank's stock falling 27% in 2026, making it one of the worst performers on the Nifty, mutual funds have increasingly favoured HDFC Bank over ICICI Bank. By August-end, ICICI Bank remained the larger mutual-fund holding at ₹3,03,418 crore compared to ₹2,85,394 crore for HDFC Bank, according to The Economic Times. However, HDFC Bank accounted for 4.96% of equity assets under management against ICICI Bank's 5.27%, with the recent flow pattern showing net buying for HDFC Bank while ICICI Bank recorded net selling. This divergence is turning India's largest private-sector banking stocks into a test of whether domestic investors are positioning for HDFC Bank's recovery or simply buying a cheaper stock. Nomura noted that the stock could remain under pressure until there is clarity on the next CEO and mandate, as the succession question is central to the investment case.
HDFC Bank's June quarter results showed mixed performance with healthy balance sheet growth but continued margin pressure. Gross advances grew 15.4% year-on-year, while deposits also expanded at a healthy pace, indicating strong business momentum. However, net interest margin (NIM) fell to 3.26% from 3.38% in the March quarter, with return on assets declining to 1.85% and ROE coming in at 13.8%, compared to 14.1% in the previous quarter. The bank's profit after tax was ₹190.6 billion in the June quarter, reflecting the challenges in profitability despite robust balance sheet expansion. UBS forecasts deposit CAGR of 15.5% over FY26-28E and expects around 42% of HDFC Bank's branches are less than five years old, providing room for these newer branches to mature and contribute more meaningfully to the bank's business.
HDFC Bank currently trades at 1.4 times fiscal 2028E price-to-book value (P/BV), with the stock trading at a 33% discount to its own long-term average P/BV, according to UBS. The bank is also trading at a 30% discount to ICICI Bank on the same metric, with UBS noting that this represents the widest-ever discount between the two banks. HDFC Bank is positioned at 1.8 times book value, representing a significant de-rating from its earlier premium valuation. According to Equitymaster, the bank trades at 13.2 times earnings, below ICICI Bank at around 16.7 times and Kotak Mahindra Bank at around 20.5 times. The comparison with ICICI Bank is particularly interesting, as ICICI Bank commands a higher PB and ROE of 15% compared to HDFC Bank's 13.1%. Jefferies estimates HDFC Bank trades at 1.5 times FY27 adjusted book value, about 30% below ICICI Bank's valuation, while Nomura's target remains ₹950 and Jefferies has a target price of ₹880 for HDFC Bank.
