BofA downgrades HDFC Bank, cuts target price after 20% rally from Feb-lows

A shallow rate cut cycle will delay NIM recovery, BofA analysts said, adding that catalysts are likely to play out only in FY26.

BofA expects the stock's risk-reward to be in a narrow range over the next 12 months.

In the Q1 business update, HDFC Bank's deposit growth was soft during the quarter, growing at 15.3% YoY on a pro-forma basis, and flat sequentially. CASA declined 5% QoQ, and as a a result, the CASA ratio was down about 190 bps QoQ to 36%.

The bank has disclosed that its loan book and deposits grew 14.9% YoY and 16.5% YoY, after excluding the merger impact.

According to the bank, average deposits grew a healthy 4.6% QoQ, while average AUM grew 0.8% QoQ. This is primarily because deposits in the last quarter (Q4) saw a sharp build-up towards the end of the quarter (as is normally seen in Q4), and so the base on an average basis needs to actually be deflated.

saw some buying in recent weeks on the news of potentially increasing the weightage of in the MSCI EM index. Nuvama expects the lender's weightage in the global index to double to 7.2%-7.5%, potentially bringing in $3.2 billion to $4 billion in inflows.