$HDFCBANK Set for Value Re-Rating

$HDFCBANK reported a 9% year-on-year net profit growth for Q4 FY26, reaching ₹19,221 crore. Despite lingering margin pressures, the bank maintained strong profitability, delivering a healthy Return on Assets (ROA) of 1.9% and a Return on Equity (ROE) of 14% for the full fiscal year. Credit and Deposit Rebound: Loan growth experienced a notable recovery, rising to 12% year-on-year compared to just 5% in FY25. This turnaround was primarily driven by a robust 20% growth in business banking (MSMEs), while core retail housing loans expanded moderately by 6%. Concurrently, deposit growth remained highly resilient at 14%. Operational Tailwinds: The bank’s credit-to-deposit (CD) ratio improved significantly to 95%, successfully easing previous growth constraints. Furthermore, core cost-to-income efficiency improved from 40.5% to 39.5% year-on-year, driven by contained operating expenses and technology investments. Asset Quality & Balance Sheet Comfort: Asset quality continues to look pristine. HDFC Bank holds massive excess floating and contingent provisions amounting to ₹37,100 crore (1.3% of the total loan book), which provides a substantial cushion to absorb future credit costs. Attractive Valuation Opportunity: Following a period of stock underperformance tied to leadership transitions and merger digestion, the bank now trades at an appealing 1.5x FY28E core book value. This steep 15% valuation discount relative to peers like ICICI Bank presents a compelling long-term accumulation opportunity as earnings momentum catches up.