HDFC Bank’s share price was wobbly on Tuesday morning after it closed over 2% higher on Monday.

What Happened: Jefferies maintained its “buy” rating on HDFC Bank with a price target of ₹1,890. The target indicates an upside of around 12% from the stock’s last closing price of around ₹1,688.

The bank aims to reduce its loan-to-deposit ratio (LDR) to 85%-90% over the next three years, which Jefferies believes is achievable. This target can be met with a 15% compound annual growth rate (CAGR) in deposits and a moderated 11% annual growth rate in loans, the research firm estimates.

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HDFC Bank's strategy to expand its branch network is expected to help the bank increase its share of deposits, but loan growth is likely to stay at or below the sector level, in line with the bank’s cautious approach, according to the brokerage. Despite this, there is scope for the bank to lower its funding costs, which could lift its net interest margin (NIM), the analysts firm noted.

Jefferies also notes that compliance with priority sector lending (PSL) norms is not expected to have a significant impact on the private bank's profitability. Additionally, a slower expansion in unsecured loans is seen as a positive move to keep credit costs under control. The research firm has slightly trimmed its earnings estimates for the bank by 4%-6% to account for slower loan growth.

Price Action: HDFC Bank’s share price was down 0.15% to trade at ₹1,685.65 as the markets opened on Tuesday.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.