Jefferies analysts Prakhar Sharma and Vinayak Agarwal note that HDFC Bank’s share price is down 25% so far in 2026, underperforming peers amid concerns around the exit of its chairman and the potential impact of the West Asia conflict. “Now, valuations at 1.6x FY27E adjusted P/B, 13x PE are at a discount to large private banks and at a low premium to peers,” Jefferies writes, arguing that the derating has overshot fundamentals.
During the day, HDFC Bank shares were trading around 2% lower at Rs 744 on BSE. Last week, Jefferies’ top equity strategist Christopher Wood announced in his ‘GREED & fear’ newsletter that he is exiting HDFC Bank from both his Asia ex-Japan and global long-only equity portfolios.
Also Read | Jefferies’ Chris Wood sells HDFC Bank after Chairman’s puzzling exit, cuts India weightage
While Wood stopped short of clarifying the reason behind the exit, former bureaucrat Atanu Chakraborty’s resignation letter last week as the chairman of HDFC Bank worried investors, as he cited “certain happenings and practices within the bank” that he said were “not in congruence” with his personal values and ethics.
However, looking beyond the crisis, Jefferies contends that the current multiples are compelling given HDFC Bank’s “stronger asset quality, healthy growth and ROE” and that its sensitivity to higher credit costs and lower topline is “manageable”.
Key things that Jefferies said on HDFC Bank in its latest report
For FY27, Jefferies forecasts a return on assets of 1.7% and a return on equity of 14%, with gross non-performing assets at 1.2% and net NPAs at 0.4%, alongside a capital adequacy ratio of 19%.“It is among our sector top picks,” the report says, placing HDFC Bank in the same preferred bucket as ICICI Bank, Axis Bank, and Kotak Mahindra Bank within private lenders.
Jefferies’ base-case scenario builds in a 13% compound annual growth rate in loans over FY26-28, average net interest margins of around 3.5%, and stable asset quality metrics, and values the core bank at 2.5 times adjusted book for March 2028.
The sum-of-the-parts framework pegs the standalone bank’s value at Rs 1,110 per share and group subsidiaries such as HDFC Life, HDFC AMC, HDB Financial, HDFC Ergo, and HDFC Securities at another Rs 131 per share, taking the consolidated fair value to Rs 1,240.
On the risk side, Jefferies flags that clarity on “board issues and rollover of CEO term / Chairman appointment can aid rerating,” implicitly acknowledging that governance overhangs have weighed on sentiment. It warns that a spike in interest rates could hurt, as the merged entity now has a higher share of non-retail funds and its cost of funding is more closely linked to market rates than in the past. A slower ramp-up in priority-sector lending could also drag margins and ROA through higher compliance costs.
Even so, Jefferies sees the headwinds as transient against the merger-led structural positives. The house expects synergies from the HDFC Ltd amalgamation to flow through in the form of cross-selling opportunities, better service and operational efficiencies. It also believes that continued branch expansion will support the deposit mobilisation needed to fuel loan growth.
It also points out that while HDFC Bank’s loan-to-deposit ratio at 99% (3QFY26) is among the highest in the peer set, its liquidity coverage ratio of 116% remains healthy, suggesting that balance-sheet risks are contained.
Jefferies underlines that the current correction has pushed HDFC Bank below its own historical valuation bands. The stock now trades under its long-term average one-year forward price-to-earnings and price-to-adjusted-book multiples, even as the bank is projected to deliver net profit growth of 11% in FY26 and 7% in FY27, and to lift earnings per share from Rs 49 in FY26 to Rs 52 in FY27 and Rs 60 in FY28.
