The brokerage’s view comes after HDFC Bank submitted the names of two candidates to the Reserve Bank of India (RBI) for the top executive position. The bank has not disclosed the names of the candidates, while the final appointment remains subject to regulatory approval.
The leadership transition is taking place ahead of the end of Sashidhar Jagdishan’s second term. Jagdishan, who has led HDFC Bank since 2020, is scheduled to step down at the end of October 2026.
CEO succession could remove leadership overhang
According to UBS, resolution of the leadership uncertainty could act as a key near-term catalyst for HDFC Bank shares.
The bank’s board has formally begun the succession process by sending two preferred names to the RBI. The candidates were approved by the board based on the recommendations of its Governance, Nomination and Remuneration Committee. The bank has proposed a three-year term for the selected candidate.
The RBI’s approval will be required before the appointment can be finalised, as private-sector banks need prior regulatory approval for their managing director and CEO appointments.
UBS expects the removal of this uncertainty to potentially improve investor visibility on the bank’s next phase of growth and management strategy.
Loan growth showing signs of recovery
UBS also expects HDFC Bank’s loan growth to improve after signs of recovery in recent quarters.
The brokerage expects loan growth to move towards around 15% over FY27-FY29E. HDFC Bank’s advances growth was around 15.5% in the first quarter of FY27, according to industry data cited in the brokerage assessment.
The improvement in credit growth is important for the bank because stronger advances can support revenue expansion, particularly if growth is accompanied by an improvement in margins and asset quality.
UBS expects the bank’s return on assets (RoA) to improve to around 1.9% in FY27 and FY28 as loan growth and margins recover.
Margins seen improving towards 3.5%
Another factor highlighted by UBS is the potential improvement in HDFC Bank’s margins.
The brokerage expects margins to move towards 3.5%, supported by a gradual shift towards a higher retail loan mix.
A larger retail lending contribution could help the bank improve its overall profitability profile, although the actual trajectory will depend on funding costs, loan pricing, credit demand and the competitive environment.
The bank’s ability to grow loans while managing deposits and funding costs will therefore remain an important factor for its financial performance over the coming years.
Newer branches offer productivity potential
UBS also sees room for productivity gains from HDFC Bank’s branch network.
Around 42% of the bank’s branches are less than five years old, according to the brokerage. UBS believes these relatively new branches have scope to mature and contribute more meaningfully to business growth over time.
As branches build their customer base and increase lending and deposit activity, the productivity of the network could improve.
This provides another potential source of operating improvement for HDFC Bank beyond loan growth and margin recovery.
Deposits expected to grow steadily
On the liability side, UBS forecasts a deposit compound annual growth rate (CAGR) of 15.5% over FY26-FY28E.
Deposit growth remains important for HDFC Bank as the lender seeks to support credit expansion while maintaining an adequate funding base.
A sustained increase in deposits could provide the bank with greater capacity to fund future loan growth. At the same time, the cost of attracting and retaining deposits will remain an important consideration for margins and profitability.
The balance between deposit mobilisation, loan growth and funding costs will therefore be closely watched by investors.
HDFC Bank valuation remains a focus
UBS also highlighted HDFC Bank’s valuation as part of its investment case.
According to the brokerage, the stock is trading at around 1.4 times estimated FY28 price-to-book value (P/BV). UBS said this represents a discount of around 33% to HDFC Bank’s own long-term average P/BV.
The brokerage also noted that HDFC Bank is trading at around a 30% discount to ICICI Bank on the same valuation measure.
UBS said the gap between the two banks represents the widest-ever discount on this metric, according to its assessment.
The valuation comparison is being considered alongside expectations of improving loan growth, margins and returns rather than in isolation.
Leadership transition remains key event
HDFC Bank’s succession process is now moving into a regulatory phase after the bank submitted two candidates to the RBI. The names have not been publicly disclosed, and the regulator’s approval is still required before the next CEO can formally take charge.
The bank has also made changes to its senior management structure as part of the succession process. It has proposed the reappointment of V Srinivasa Rangan as a whole-time director and appointed Chief Credit Officer Jimmy Tata as a whole-time director, subject to the required approvals. HDFC Bank also plans to create an additional whole-time director position for the incoming CEO.
For investors, the leadership transition will remain an important development as the bank enters the next phase under a new MD and CEO.
UBS’s current assessment combines the potential easing of leadership uncertainty with expectations of improving loan growth, margins, asset productivity and returns. However, the Rs 1,000 target price is a brokerage estimate rather than a guaranteed future market price, and actual stock performance can vary depending on financial results, market conditions, regulatory developments and broader banking-sector trends.