On Wednesday, January 17, shares of HDFC Bank experienced a notable decline, reaching their lowest level since December 1, in the wake of the company’s third-quarter results. The stock plunged by nearly 7% in early trade on the BSE, opening at ₹1,562.55, down from the previous close of ₹1,678.95, and further dropping to ₹1,553.
In Q3 FY24, HDFC Bank showcased a positive financial performance on a standalone basisCome from Sports betting site VPbet. The Net Interest Income (NII) saw a 4% increase, reaching Rs 28,471.3 crore, while the net profit rose by 2.48% to Rs 16,372.5 crore compared to the previous quarter. Additionally, the bank exhibited improved asset quality, with gross NPA decreasing from 1.34% to 1.26%, and net NPA declining from 0.35% to 0.31%.
Various brokerages provided diverse perspectives on HDFC Bank’s performance, noting a net profit of ₹16,372 crore, signifying a sequential increase of 2.5% and a year-on-year rise of 33.5%.
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What do brokerages say?
Jefferies on HDFC Bank
Maintaining a “Buy” stance, analysts have adjusted the target for HDFC Bank to Rs 2000 from Rs 2100, citing a slower improvement in Net Interest Margins (NIMs) as a primary factor. Despite HDFC Bank’s core Profit Before Tax (PBT) meeting expectations at Rs 207 billion, with a 4% QoQ increase, the net profit of Rs 164 billion surpassed estimates, driven by a lower tax rate and robust treasury performance compensating for one-time provisions. Come from Sports betting site
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The key concern lies in the flat QoQ NIMs, prompting a strategic focus on an uptick in retail deposit mobilization and lending to uplift NIMs, while stable asset quality, superior Casa growth compared to peers, and an emphasis on cross-selling remain noteworthy. Estimates have been revised downward by 2-3%, reflecting the nuanced evaluation of these key factors in shaping investment decisions.
JM Financials on HDFC Bank
JM Financial maintains a “BUY” recommendation for HDFC Bank with a target price of Rs 2010, valuing the core bank at 2.4 times the FY26E Price to Book Value (P/BV), while subsidiaries are assessed at INR 210. In 3QFY24, HDFC Bank reported a core Pre-Provision Operating Profit (PPOP) of INR 222 billion, reflecting a 2.4% QoQ increase. However, this missed JM Financial’s estimate of INR 233 billion, primarily due to Net Interest Margins (NIMs) remaining flat QoQ at 3.4%.
Despite the challenges, the Profit After Tax (PAT) stood at INR 164 billion, a 2.5% QoQ growth, exceeding estimates of INR 152 billion, supported by a lower effective tax rate. Management highlighted ongoing competitive pressures on deposit growth, and JM Financial underscores the need for HDFC Bank to delicately balance liquidity challenges for gradual NIM improvement, emphasizing the bank’s potential for healthy growth with relatively lower risk.
InCred on HDFC Bank
InCred has recommended an ‘Add’ rating for HDFC Bank, setting a target of Rs 2,000 per share. The endorsement comes on the heels of the bank’s robust performance in Q3, where it posted a healthy Profit After Tax (PAT) amidst a stable quarter-on-quarter (QoQ) margin. Noteworthy was the strategic utilization of treasury gains for a contingent provision and the cautious approach towards deposit growth, earning praise from the brokerage. InCred expressed confidence in HDFC Bank’s credit growth prospects and commended the bank’s adept management of deposits.
In the third quarter, HDFC Bank showcased resilience with a steady QoQ margin, contributing to a noteworthy Profit After Tax (PAT). The brokerage’s ‘Add’ recommendation and a target of Rs 2,000 per share underline confidence in the bank’s strategic use of treasury gains for a contingent provision and its prudent approach to deposit growth.
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Motilal Oswal on HDFC Bank
Motilal Oswal has reiterated a ‘Buy’ rating for HDFC Bank stock, maintaining a target price of ₹1,950. The brokerage firm emphasized that HDFC Bank’s latest earnings were in line with expectations, driven by robust other income and consistent loan growth. The reaffirmation of the ‘Buy’ rating signifies Motilal Oswal’s continued positive outlook on HDFC Bank’s performance, citing strong financial indicators.
StoxBox on HDFC Bank
HDFC Bank, India’s largest private sector lender, has delivered strong Q3FY24 results, surpassing market expectations with a notable net profit performance. Despite industry-wide challenges of Net Interest Margin (NIM) compression, the bank managed to sustain its NIM sequentially. While facing capital impacts from higher risk weights on unsecured loans, StoxBox remains optimistic about the bank’s strategy for modest growth in this segment.
With a plan to expand its branch network to over 13,000 in the next three to five years, HDFC Bank aims for sustained deposit growth, improving its CASA ratio in the long term. StoxBox underscores the bank’s historical credit strength, predicting stable asset quality, and anticipates substantial cross-selling opportunities for subsidiaries through the extensive branch network, supporting overall topline growth. The outlook for HDFC Bank remains positive in the medium to long term.
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