Brokerage firms have already put the bank's outlook on bullish, raising the target price of their stock to somewhere in between, following its latest quarterly and annual results for fiscal 2025 (FY25). ₹2,250 and ₹2,340. This means an increase of 17-22% compared to the current share price level ₹1,924, resulting in market valuation ₹17.75 trillion. From the dollar, its valuation is $210 billion, as big as the Bank of China, ranking seventh in the global pecking order of top banks.
At this juncture, this achievement is worth noting. The spread of private banking began after economic liberalization in the early 1990s; new banks such as Indusind, ICICI and HDFC Bank emerged. Over the past two decades, if the Indian economy has grown nearly five times from GDP in 2005 to $3.9 trillion in 2024, the valuation of the banking and financial services sectors has increased 50 times. Now, as India's economy further plans to grow to a $10 trillion economy, a private bank at the top of the valuation alliance's dining table is likely to make it an important market.
Abhay Modi, head of research at Helios Mutual Fund, said he has been following HDFC Bank for two decades: “Banking is a solid agent to play the growth of India. Among banks, HDFC Bank has been our top choice because it has a balance sheet that can scale up and has the best retail business to take advantage of the growing wealth per capita.”
HDFC Bank's market performance also marked a significant shift in the event. HDFC Bank was a laggard among its competitors ahead of its share price gains in the last 12 months. Once known for quarterly revenue and profit growth, a range of activities, including leadership changes, slowed banks. It is a popular stock that lost its premium after starting to release low numbers of numbers six months ago.
Given its size and importance, there are some key questions that need answers. What changes are analysts optimistic about again? What else?
The bank did not respond MintThe problem.
behind
In nearly four years, until a year ago, HDFC Bank stocks have not made money for investors. Stocks stagnated between May 2021 and May 2024 ₹1,400 levels, while the beautiful bank index rose to 48,970 points from 32,160 in the same period.
Competitors such as ICICI Bank and Axis Bank have increased valuations. During the same period, ICICI Bank's share price almost doubled ₹Level 600 ₹1,160, while the movement of the axis ₹670 TO ₹1,162. Apparently, India's largest private banker hit the wall.
When the problem first started in late 2020, it seemed that the bank had grown too fast without sufficient technology investment. In that year, the bank witnessed several disruptions in its core banking system, freezing transactions. This situation prompted bank regulators, the Reserve Bank of India (RBI), to intervene. In December 2020, the Reserve Bank of India asked HDFC banks to limit expansion of their digital banking services and to stop purchasing new credit card customers.
The ban comes months after the bank appointed Sashidhar Jagdishan as the new CEO (CEO) and managing director (MD). Aditya Puri, who has run a bank since its inception, retired.
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Pre-Ban In November 2020, HDFC Bank was the largest credit card issuer with a market share of 25.6%, and by May 2021, its market share dropped to 23.8%.
The ban on issuing new credit cards lasted for eight months until August 2021, with the remaining restrictions being withdrawn to March 2022.
The impact on its business is being explained. The bank reported a 19.1% increase in net income (net interest income and other income) on a fiscal year 2019 basis; in fiscal year 21, the growth gradually dropped to 13.4%. Net profit growth also declined, from 20.5% in fiscal 2019 to 18.5% in fiscal 21.
“The cut is a depth, as the credit card business is one of the highest earnings in the HDFC bank portfolio,” Modi said.
A tough marriage
Then, in 2023, HDFC Bank merged with its parents HDFC. logic? As a retail bank, HDFC banks have hardly issued through home loans, and HDFC is already huge. The merger will immediately provide an entity with a large mortgage book and add weight to its portfolio, as home loans are large ticket loans and are safest compared to a car or consumer durable loan.
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Although the merger brought scale to HDFC Bank's assets, it also brought some problems. Since a housing loan company is not a bank, it is classified as a housing finance company, it has a high cost of borrowing compared to a bank.
After the merger, the bank also faces imbalance in its key credit ratios (CD ratios). This ratio measures the amount of deposits a bank with the loan issued and is a key measure of liquidity. The lower the ratio, the safer its books.
HDFC Bank's CD ratio was 87, which rose sharply to 108% in the second quarter of fiscal 24 and 110% in the third quarter of the year.
This actually means that HDFC banks can’t make new progress unless it finds more deposits to lower their CD ratio.
Jagdishan had few choices before. To reduce the unusually high CD ratio, he had to limit loans, sell loans and invest more to expand the retail franchise to attract more deposits. All these actions either reduce business or increase costs. During the six quarters of the merger, most senior management efforts focused on keeping the bank evenly.
“Jagdishan is not the first choice to run the bank, which means he has to work hard to prove himself,” said an executive of HDFC Bank, a now retired bank.
“Jagdishan is not the first choice to run a bank, which means he has to work hard to prove himself.” – Retired banker
Long-term firefighting has caused the bank to lose on every important indicator. Once leaders in low-cost current account and savings account (CASA) deposits were mobilized, their share of CASA deposits fell from 46% in FY21 to 35% in FY25.
Net interest margin (NIM), whose interest rate difference between borrowing and lending fell to 2.5% from 4.1% before the merger, while the return on equity in FY25 was 14.6%, lagging behind 17.9% of its largest competitor, ICICI ICICI.
turnover
Analysts noted that the bank finally managed to prove better lending, profits and NIM growth in the fourth quarter of fiscal 25.
“It almost feels that HDFC banks are regaining their best competitors,” said an analyst overseeing the company. ₹32 billion banking and finance department funds. Analysts don't want to be identified.
Eighteen months after the ban on credit card issues, the bank took positive moves, as if to catch up with the wasted time. By January 2024, it had issued 20 million cards and recovered more than half of the market losses to its competitors.
As of March 2025, HDFC Bank was a clear market leader, with 23.8 million cards issued, followed by SBI cards (20.8 million), ICICI Bank (18.2 million) and Axis Bank (14.9 million).
The bank also made significant investments in technology and needed to overhaul its core banking system. In older systems, even small ticketing UPI transactions had to go through their core banking system, which caused the system to slow down, resulting in downtime. In the updated system released in July 2024, transactions have been resolved on the peripheral server and then settled with the core system.
Jagdishan's move is a move when managing financial difficulties related to the merger, which is worth noting. HDFC Bank actively expands its retail business by adding physical branches. Shortly after the merger came into effect in July 2023, the bank added nearly 900 branches in fiscal year 24 and had another 800 branches in the first nine months of fiscal year 25. The idea is to greatly increase retail sediments to buffer CD ratios.
The plan continues to be aggressive – the bank aims to open 13,000 new branches in smaller towns by 2028.
The senior director of IDFC First Bank said he did not want to be named: “The expansion seems to be aimed at restoring the CASA ratio, which has always been the backbone of HDFC bank profits. It's a risky bet with a 50:50 chance of success.”
Furthermore, since it is impossible to issue large loans, as it will further increase the CD ratio, Jagdishan is said to place more emphasis on unsecured loans, as well as loans provided to small and medium-sized enterprises (SMEs). The bank reported in March 2025 that its retail to wholesale loan ratio was 57:43, rather than 55:45 in March 2024.
In a bank report in March 2025, Ambit Capital analyst Jignesh Shial said SME loans are the new best attraction for bank loan business. Over the past three years, the growth rate of SME loans has been 19% per year, with a huge potential demand. “Last time, the credit gap for small and medium-sized enterprises was estimated to be $819 billion, which is the second most profitable sector among banks,” Shial wrote.
HDFC Bank is expected to further benefit from its growing retail banking business. In an April 2025 theme report, analysts pointed out that unlike advanced economies like the United States, analysts are still in the growth stage. According to the report, only 20% of the Indian population can get retail loans, compared with 83% in the United States. More than 60% of retail loans are made up of mortgage and vehicle loans, while credit card loans account for 5%.
“The business growth strategy led by the branches of HDFC Bank is not only more focused, but also a position to gain market share from public sector banks by entering its territory. This will be even more obvious, especially in attracting cheap savings deposits, where public sector banks still have 60% of the public sector market share,” Nitin Aggarwal said in Motilal os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os os o ”
Aggarwal noted that it would take several quarters for the bank to start reporting net income growth in the mid-year period, which shrunk by 9.2% in the fourth quarter of FY25.
“The worst thing is that HDFC Bank is behind HDFC Bank. Only one tenth of the growth will change market sentiment,” said Modi of Helios Mutual Fund.
