Despite the concerns about weak earnings growth and continued downward pressure on net interest margin, HDFC Bank stock remains a top pick among several major financial firm brokerages after its second-quarter financial results for the fiscal year 2027. Notable financial firms, including JPMorgan and Citi, have downgraded and kept their bullish outlook on the private sector lender. Strong positive investment numbers from Bernstein and other research companies indicate a stock appreciation of almost 58% from the recent closing price.

Overview of Q2 earnings and Bernstein maintains outperform rating

The divergent views come after the July-to-September quarter earnings of HDFC Bank, which broadly met expectations in the broader market. The private sector bank at the same time earned a standalone net profit of ₹19,510 crore, up 4.7% from one year prior, while also recording a year-on-year jump in net interest income of 9.7% to ₹34,619 crore. A CNBC TV18 consensus poll earlier pegged net profit at ₹19,567 crore and net interest income at ₹34,861 crore. 

Its total gross non-performing asset ratio declined to 1.11% from 1.17% in the previous quarter, while gross advances rose by 16.3% year-on-year. Even with these consistent bottom-line numbers, the near-term outlook for the bank has remained uncertain because of lingering margin pressures, limited profitability improvement, and queries about the sustainability of loan growth by individual brokerages.

In its latest recommendation, the Wall Street major Bernstein has retained an Outperform rating for HDFC Bank with a target price of ₹1,150, suggesting that the stock could rise around 58% from its recent market close. In its evaluation, the brokerage said that the bank continued its negative earnings growth story in the quarter even while managing costs carefully and keeping the ROA at 1.8%. 

Net interest income, although experiencing some margin erosion, continued to grow at a healthy pace, and asset quality has remained resilient to economic pressures, Bernstein said. Such conviction acts as the rationale for the firm’s much higher target price than its current market price.

Perspectives and adjustment of target prices

JPMorgan and Citi have jumped in on HDFC Bank with positive ratings and have trimmed their respective targets as a consequence of the quarterly developments. JPMorgan was assigned a Lower Target price of ₹970 from ₹990, marking a downward revision from its earlier Overweight rating, thus giving a 33% upside. 

The brokerage described the second quarter as steady, as earnings were also in line and net interest margin fell 10 basis points sequentially to 3.30%, a decline partly driven by FCNR deposits. Further margin guidance is expected to be neutral to positive, though with reduced balance-sheet flexibility noted as a factor as the liquidity coverage ratio fell to 113%, JPMorgan wrote. 

Citi had maintained its Buy rating with a price target of ₹880, up from the earlier target of ₹970, indicating that the stock could rise by nearly one-fifth. The two key reasons for the adjustment, according to Citi, were margin compression, growth that has yet to keep pace with the broader banking system, and restricted liquidity buffers. However, the brokerage pointed out that operating profitability was well supported by fees, asset quality has been strong, and warned of potential execution risks in the leadership arena.

Other major financial companies have also published detailed assessments of HDFC Bank’s operational scale and valuation prospects. Jefferies retained its Buy rating with a price target of ₹880, giving a 21% upside. Core margins performance was better than initially thought, and asset reallocation, better mobilization of retail deposits, and improved yield performance on asset additions will support profitability in the future, the firm said. 

Nomura retained its Buy judgment, keeping its estimate nearly 29% higher at ₹940. A reduction in liquidity coverage would reduce the bank’s ability to make aggressive loans and would require deposit mobilization to keep the bank competitive, Nomura said. For the quarter, the firm said FCNR(B) inflows added around three per cent to sequential deposit growth, while the core pre-provision operating profit grew 12% year-on-year to ₹28,700 crore, close to guide. 

Goldman Sachs continued to rate the stock a Buy with a target price of ₹861, implying an upside of around 18%. Goldman Sachs lifted out net interest margin by eight basis points and called out core revenue growth to 10% from 7% Q1Q1, along with core pre-provision operating profit growth to 13% from 11%, exceeding consensus estimates.

Conclusion

The post-earnings response from leading brokerage firms suggests that while HDFC Bank’s short-to-medium-term operational outlook has been hurt by margin compression, liquidity concerns and relative growth, investors’ trust in the bank’s long-term performance does not appear to have been dampened. Target price declines by institutions such as JPM and Citi have not halted the robust upside forecasts from research institutions like Bernstein, which see gains as high as 58%. Given the stability of its asset quality, credit expansion, and core earnings ratios, HDFC Bank is a watch of a watch in the Indian banking sector.