Global brokerage CLSA has struck an unusually confident tone on HDFC Bank in its recent research note, maintaining its Outperform rating and ₹1,200 price target despite recent market concerns. The brokerage argues that most concerns weighing on the stock are either misunderstood or temporary, and that the recent correction has created a compelling risk-reward opportunity for investors.

Stock Performance and Market Concerns

Since its Q3FY26 operational update, HDFC Bank's shares have declined 6.00-7.00%, driven primarily by investor anxiety over slowing deposit growth and a sharp rise in the loan-deposit ratio to 99.00%. However, CLSA pushes back firmly against this narrative, describing the situation as a classic case of 'great franchise, noisy transition' rather than a fundamentally broken story.

LDR Concerns Dismissed as Overdone

The brokerage provides detailed analysis showing that HDFC Bank's LDR concerns are largely misplaced. The following table illustrates the key metrics driving the LDR narrative:

CLSA notes that the LDR rise was largely driven by a deliberate reduction in wholesale deposits, while quarterly-average CASA growth has actually improved significantly. The brokerage also points to the 100 basis point CRR cut by the Reserve Bank of India, which mechanically inflated reported LDRs across the banking system.

Margin Outlook and Cost Structure

Contrary to criticism that HDFC Bank has failed to benefit from refinancing wholesale bonds with deposits, CLSA presents a more optimistic view. Since the merger, the bank's net interest margins have compressed by only 13 basis points, significantly outperforming peers:

Looking ahead, CLSA expects substantial margin improvement as approximately ₹350 billion of bonds mature or become callable in FY27 at a weighted average cost of 7.50%. This is expected to result in a 20-25 basis point reduction in cost of funds over the next year as deposit repricing takes effect.

Operational Performance and Growth Prospects

After heavy investments in FY23 and FY24, expense growth is moderating across the bank. Core Pre-Provision Operating Profit growth has already improved to 5.00-7.00% year-on-year, despite loan growth of approximately 10.00%. CLSA projects high-teens core PPOP growth over the next two years as hiring slows and productivity improvements take hold.

Valuation and Investment Thesis

At around 1.70x FY28 price-to-book ratio, HDFC Bank trades at a 10.00-12.00% discount to ICICI Bank. While CLSA acknowledges that some discount is warranted due to lower return on equity, the brokerage believes the current valuation gap is excessive given the bank's franchise quality and improving operational metrics.

HDFC Bank Limited has announced an earnings call to discuss its Q3FY26 financial results, scheduled for January 17, 2026. The conference call will provide analysts and investors with insights into the bank's performance for the quarter and nine months ended December 31, 2025.

Earnings Call Details

The bank will host the earnings call at 18:00 hours IST on Saturday, January 17, 2026. During this session, HDFC Bank's senior management will discuss the unaudited standalone and consolidated financial results with participants, offering detailed analysis of the bank's Q3FY26 performance.

Conference Call Access Information

HDFC Bank has provided comprehensive access details for participants to join the earnings call:

Additional Information

The bank has encouraged participants to use the pre-registration facility available at the provided link to avoid wait times during the conference call. This earnings call follows the bank's earlier intimation dated December 23, 2025, regarding the board meeting convened for approval of the financial results.

Post-Call Availability

HDFC Bank has confirmed that an audio recording of the conference call will be made available on the bank's official website in due course, allowing stakeholders who cannot attend the live session to access the discussion at their convenience.

The announcement was made through an official communication to BSE Limited and National Stock Exchange of India Limited under Regulation 30, ensuring compliance with regulatory requirements for listed companies.