HDFC Bank shares in Thursday's session traded with mild gains even as the lender surprised the street with a better-than-expected Q3 earnings. At around 10:44 am, HDFC Bank's shares were trading higher by just 0.2 per cent, while at the day's high it touched levels of Rs 1,687 per share on the NSE.

For the December quarter, HDFC Bank posted a standalone net profit of Rs 16,735.5 crore as against analysts expectations of a marginal on-year decline in its net profit.

According to Zee Business research, the private sector lender was estimated to register a net profit of Rs 16,201 crore for the October-December period.

The bank's net interest income (NII)—or the difference between the interest earned and the interest paid—increased to Rs 30,653.3 crore from Rs 28,471.3 crore a year ago, translating to year-on-year growth of 7.7 per cent, according to a regulatory filing. 

Zee Business analysts had pegged HDFC Bank's third-quarter NII at Rs 30,197 crore.

Nonetheless, the bank's asset quality deteriorated with net NPAs as a percentage of total loans—a measure of asset quality—stood at 1.42 per cent in the quarter ended December 31, rising from 1.36 per cent for the previous three months and 1.26 per cent in the third quarter of FY24. 

Global brokerage UBS has maintained its buy on the lender with the target pegged at Rs 2,100, implying gains of over 26 per cent. The brokerage underlined that the tepid loan growth led to LDR or loan-to-deposit ratio decline of 160bp sequentially to 98.2 per cent. Furthermore, even though the lender's management has been confident on asset quality, it sees growth to still take long. Also, risk-reward is favourable at 1.9x FY26E P/BV, added UBS.

Macquarie on HDFC Bank, meanwhile, maintained 'outperform' with the most bullish target of Rs 2,300- implying potential gains of over 38 per cent. The brokerage pointed out that the lender delivered decent results in a tough macro environment. Also it acknowledged that the marginal increase in credit costs was because of the higher agri slippages.

The lender's management expects NIM or net interest margin to improve once macro environment improves. Also, the lender has the potential for ROA improvement over the next 2 years driven by NIM expansion.