HDFC Bank shares declined 0.91% to ₹922.60 on Monday morning, falling from the previous close of ₹931.10, despite reporting strong third-quarter results with net profit rising 11.00% year-on-year to ₹18,654.00 crore. The stock touched an intraday high of ₹936.15 and low of ₹919.50, with trading volume reaching 117.31 lakh shares valued at ₹1,089.04 crore.

Financial Performance Highlights

The bank's core financial metrics showed mixed but generally positive trends during the December quarter. Net profit of ₹18,654.00 crore exceeded Street estimates of ₹18,473.00 crore, though remained relatively flat versus ₹18,641.00 crore reported in Q2FY26. Net interest income grew 6.40% year-on-year, while net interest margins expanded 8 basis points quarter-on-quarter to 3.35%, supported by better liquidity and regulatory changes.

Loan growth improved to 12.00% year-on-year, while deposit growth of 11.60% lagged behind, pushing the credit-to-deposit ratio to 98.70% from 98.20% a year ago. The liquidity coverage ratio declined to 116.00% from 120.00% in the previous quarter.

Mixed Analyst Reactions and Stock Performance

The counter saw selling pressure with 63.53% sellers against 36.47% buyers during morning trade, reflecting mixed analyst sentiment despite the in-line results. Elara Securities upgraded the stock to 'Buy' from 'Accumulate' with an unchanged target price of ₹1,147.00, noting the bank has "traversed through tougher transition" following its merger with HDFC Ltd.

However, JM Financial downgraded the rating to 'Add' from 'Buy', revising the target price downward to ₹1,050.00 from ₹1,160.00. The brokerage cited concerns over the bank's ability to achieve management's guidance of 85-90% loan-to-deposit ratio and 100 basis points higher-than-system credit growth. "Full normalisation still some time away," JM Financial stated, applying a 15% discount to ICICI Bank due to relatively lower growth and return on equity.

Operational Challenges and Strategic Outlook

The quarter saw several one-time impacts affecting operational performance. Management reported an ₹800.00 crore impact from transition to new labour codes and released ₹1,040.00 crore in contingent provisions related to a large borrower group. The bank added 473 new branches during the quarter to support future growth.

Asset quality remained stable with gross non-performing assets at 1.24% and net NPAs at 0.42%. Total buffer provisions stand at ₹37,100.00 crore, representing 1.30% of total loans. Management reiterated expectations to outpace system credit growth of 12-13% by 200 basis points, while targeting reduction in the loan-to-deposit ratio to 90% through accelerated deposit mobilization and calibrated branch expansion.

Market Dynamics and Future Prospects

According to analysts, the recent stock correction of nearly 6% this month is largely attributed to sustained foreign institutional investor selling rather than company-specific concerns. Since October, FIIs have been trimming exposure to large-cap stocks, with frontline names bearing the brunt of selling pressure.

Despite mixed analyst views, the bank's fundamentals remain intact with steady growth prospects supported by branch expansion, stable margins and easing funding costs. The interest rate environment remains supportive, with cumulative rate cuts of around 1.25% and the possibility of mild easing continuing into the new financial year.

HDFC Bank has outlined specific growth targets for FY27, aiming to achieve loan growth that surpasses the banking system's projected growth rate of 12%-13%. The bank's strategic framework also includes plans to optimize its loan-to-deposit ratio to a range of 85%-90%.

FY27 Growth Targets

The bank has set ambitious targets for the upcoming fiscal year, with loan growth expected to exceed the broader banking system's expansion rate. The banking system is projected to grow at 12%-13%, and HDFC Bank aims to outperform this benchmark through strategic market positioning and enhanced lending capabilities.

Strategic Balance Management

The bank's approach emphasizes maintaining a healthy balance between asset growth and liability management. By targeting a loan-to-deposit ratio of 85%-90%, HDFC Bank demonstrates its commitment to prudent risk management while pursuing aggressive growth objectives.

Market Positioning Strategy

The outlined strategy reflects HDFC Bank's confidence in its ability to capture market share in a competitive banking environment. The focus on exceeding system growth rates while maintaining optimal liquidity ratios positions the bank for sustainable expansion in FY27.

This strategic framework indicates the bank's readiness to capitalize on market opportunities while ensuring adequate funding support through disciplined liability management practices.