HDFC Bank shows robust loan growth amid margin recovery focus

HDFC Bank is showing signs of renewed momentum in loan and deposit growth. Recent data for Q1 FY27 indicates gross advances rose approximately 15.4 per cent year-on-year, while average deposits increased by about 13.3 per cent.

Analysts are closely monitoring the bank's net interest margin (NIM) and return on equity (ROE) as key indicators for future performance. UBS noted that a significant portion of the bank's branches are less than five years old, which is expected to drive productivity as they mature. UBS forecasts loan growth to improve toward 15 per cent over FY27-29E and expects margins to reach approximately 3.5 per cent, driven by high-yielding retail loans.

While the bank maintains strong asset quality and a high CET1 ratio of approximately 17.4 per cent, some analysts maintain a 'Hold' rating. They suggest that while growth is robust, particularly in commercial lending, profitability must improve to justify current valuations.