India's largest private lender, HDFC Bank, finds itself at a familiar crossroads that large financial institutions have always faced: the tension between the momentum of growth and the discipline of sustainability. Nomura, the Japanese brokerage, has placed its confidence in the bank's trajectory with a Buy rating and a price target of Rs 1,095, seeing in the bank's 9.9% year-on-year loan expansion a foundation sturdy enough to carry it through fiscal year 2026. The full measure of that confidence will be tested on October 18, when quarterly earnings will either confirm the thesis or complicat
Nomura sees 13% upside for HDFC Bank on strong loan growth momentum
Lending nearly as much as it takes in deposits
Mark
So Nomura is saying HDFC Bank stock could jump 13% from here. What's the actual foundation for that?
Mimi
It's built on the loan growth they're seeing. The bank grew its gross advances nearly 10% year-on-year in Q2, and that's the engine—more lending means more interest income.
Luke
But is 10% loan growth actually exceptional for a bank of that size, or is it just normal?
Mimi
It's solid, not extraordinary. The real point is consistency. They're holding that pace while deposits are growing too, even if deposits slowed to 1.4% quarter-on-quarter.
Mark
The deposit slowdown sounds like a problem. Doesn't a bank need deposits to lend?
Mimi
Yes, but year-on-year deposits are up 12%, so it's more of a quarterly rhythm than a structural issue. The CASA ratio stayed flat, which means the quality of those deposits isn't deteriorating.
Luke
The loan-to-deposit ratio hit 99%, though. That's nearly maxed out. How much more can they lend without raising more deposits?
Mimi
That's the constraint. They're bumping up against it, which means growth will slow unless they find new deposit sources or use other funding.
Mark
When do we actually know if this thesis holds up?
Mimi
October 18. That's when they report Q2 earnings. The street will be watching margins, bad loans, and what management says about dividends.
Luke
And if margins are compressed and bad loans tick up, does the 13% upside disappear?
Mimi
Probably. The call assumes they can sustain growth without margin deterioration. If that doesn't hold, Nomura will have to recalibrate.
Mark
So this is a bet on the next two weeks of data.
Mimi
It's a bet on the next two weeks, yes, but also on the bank's ability to navigate the rest of the fiscal year without hitting a wall on deposits or profitability.
El Pulso
- Nomura's revised Buy call carries real weight: a 13% implied upside on a bank of HDFC's scale is not a casual forecast but a considered bet on sustained lending momentum.
- Loan growth at 9.9% year-on-year is the engine of the bullish thesis, but the loan-to-deposit ratio climbing to 99% signals the bank is approaching the limits of how far it can stretch its balance sheet.
- Deposit growth at just 1.4% quarter-on-quarter is the quiet friction in an otherwise confident story — the bank must attract more money to keep lending at pace.
- October 18 earnings will force clarity: NPA trends, margin signals, and dividend commentary will either validate Nomura's optimism or expose the cracks beneath the growth numbers.
- A prior quarter clouded by a one-time HDB Financial stake sale gain means the market is still waiting for a clean read on HDFC Bank's underlying earnings power.
India's largest private lender, HDFC Bank, finds itself at a familiar crossroads that large financial institutions have always faced: the tension between the momentum of growth and the discipline of sustainability. Nomura, the Japanese brokerage, has placed its confidence in the bank's trajectory with a Buy rating and a price target of Rs 1,095, seeing in the bank's 9.9% year-on-year loan expansion a foundation sturdy enough to carry it through fiscal year 2026. The full measure of that confidence will be tested on October 18, when quarterly earnings will either confirm the thesis or complicate it — a moment that reminds us that in banking, as in life, the story is never fully told until the books are opened.
Nomura has reaffirmed its confidence in HDFC Bank with a Buy rating and a revised price target of Rs 1,095 per share — a figure adjusted to reflect the bank's recent 1:1 bonus issue and implying roughly 13% upside from current levels. The brokerage's optimism is anchored in one central observation: the bank is growing its lending book at a pace that positions it well for the fiscal year ahead.
The second quarter delivered numbers that support this view. Gross advances grew 9.9% year-on-year and 4.4% quarter-on-quarter, while total assets under management expanded 3.1% in the quarter and 9% over the year. For a bank of HDFC's size, sustaining growth in this range is a meaningful achievement — loan books are the primary source of interest income, and a larger book means more earnings potential.
Deposits, however, tell a more complicated story. Quarter-on-quarter growth was a soft 1.4%, suggesting the bank faced headwinds in attracting fresh money through September. The full-year picture is healthier at 12.1%, with both savings accounts and fixed deposits contributing. The CASA ratio held steady at 33.9%, a sign of stability. But the loan-to-deposit ratio rising to 99% is a constraint worth watching — the bank is now lending out nearly as much as it takes in, leaving limited room to grow without securing additional funding.
The real reckoning arrives on October 18, when HDFC Bank reports full quarterly earnings. Three things will draw scrutiny: the direction of non-performing assets, the health of net interest margins, and any dividend signals. Single-digit profit growth is expected — an improvement over the prior quarter but modest by the bank's historical standards. The previous quarter's reported profit was itself distorted by a large one-time gain from selling down a stake in HDB Financial Services, meaning the market is still searching for a clean view of underlying performance.
Nomura's bullish call ultimately rests on the belief that loan momentum will hold and that deposit and margin pressures are navigable rather than structural. Whether that belief is warranted will become considerably clearer once the October numbers are on the table.
Nomura has put a bullish stamp on HDFC Bank, the country's largest private sector lender, with a Buy rating and a revised price target of Rs 1,095 per share. The new target, adjusted after the bank's 1:1 bonus issue, suggests the stock has roughly 13% room to run from where it trades today. The call rests on one core observation: the bank is moving through a period of strong loan expansion that positions it well for growth through the fiscal year ahead.
The numbers backing this thesis are straightforward. In the second quarter, HDFC Bank's gross advances grew 9.9% year-on-year and 4.4% quarter-on-quarter, a pace the brokerage views as robust. The bank's total assets under management expanded 3.1% in the quarter and 9% over the year, another marker of momentum. These figures matter because loan growth is the engine of a bank's earnings—the larger the book of lending, the more interest income flows through. For a bank of HDFC's scale, sustaining growth in the 9-10% range annually is not trivial.
Deposits, the other half of a bank's balance sheet, tell a more mixed story. Quarter-on-quarter, deposits grew just 1.4%, a soft pace that suggests the bank faced headwinds in attracting fresh money in the three months through September. But stepping back to the full year, deposits rose 12.1%, driven by growth in both current and savings accounts (up 7.4%) and fixed-term deposits (up 14.6%). The bank's CASA ratio—the proportion of its deposits that come from these lower-cost, stickier accounts—held steady at 33.9%, a sign of stability even as overall deposit growth slowed.
One metric worth watching is the loan-to-deposit ratio, which climbed 285 basis points in the quarter to 99%. This means the bank is now lending out nearly as much as it takes in deposits, leaving less room for growth without either raising more deposits or tapping other funding sources. It is a constraint worth noting, though not necessarily a red flag.
The real test comes on October 18, when HDFC Bank reports its full second-quarter earnings. Investors and analysts will scrutinize three things: the trajectory of non-performing assets, or bad loans; the bank's net interest margins, which measure the spread between what it earns on loans and what it pays on deposits; and any commentary on dividends. The bank is expected to post single-digit profit growth for the quarter, an improvement from the prior three months but still modest by historical standards. Margins are expected to show mixed signals, partly because of the high base from a year ago.
Context matters here. In the first quarter, HDFC Bank's reported profit fell to Rs 16,258 crore from Rs 16,475 crore a year earlier, despite a Rs 9,128 crore pre-tax gain from selling down its stake in HDB Financial Services. That one-time boost masked underlying earnings pressure. The bank also announced a special Rs 5 dividend and the bonus issue, moves that signal confidence but also reflect a need to return capital to shareholders in a period of slower organic growth.
Nomura's 13% upside call hinges on the belief that the loan growth momentum will persist and that the bank's operational challenges—deposit growth, margin compression—are manageable. The earnings report in two weeks will either validate that thesis or force a reckoning. For now, the brokerage sees a bank in transition, growing its lending book at a healthy clip but navigating tighter deposit markets and margin pressure—a story that will become clearer once the numbers are on the table.
Citas Notables
HDFC Bank is well poised for growth in FY26— Nomura
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