HDFC Bank Shares Tank 7% After Q3 — But Brokerages Remain Bullish

HDFC Bank‘s share price was crashing heaving on Wednesday morning even as the lender’s December quarter results aligned with street estimates.

What Happened: The private sector bank recorded a 33% surge in net profit, reaching ₹16,372 crore in the December quarter, compared to ₹12,259 crore in the corresponding period a year ago.

The net interest income (NII) — the difference between the income a lender makes from its lending activities and the interest it pays to depositors — of HDFC Bank rose to ₹28,471 crore in the October-December period from ₹27,385 crore in the previous quarter. The core net interest margin remained unchanged sequentially, displaying a 3.4% increase in total assets and a 3.6% increase in interest-earning assets on a year-on-year basis.

One of the driving forces behind HDFC Bank’s impressive performance was the growth in its domestic retail loans, which witnessed a substantial increase of 111%. Additionally, commercial and rural loans rose by 31.4%, while corporate and wholesale loans (excluding non-individual loans of eHDFC of approximately ₹98,900 crore) showed a commendable increase of 11.2%.

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While the bank’s gross non-performing assets (NPAs) slightly increased to 1.26% in Q3 FY24, up from 1.23% in the previous fiscal year, the net NPAs improved to 0.31%, compared to 0.33% in the corresponding period.

Despite the strong numbers, there might be a potential impact on HDFC Bank’s shares, as reflected by a 7% slump in the US-listed ADRs overnight, following the announcement of the October-December quarter results.

Analyst Reactions: Bernstein maintained its “outperform” rating for the stock with a price target of ₹2,200. The analysts said that the bank reported a very weak set of numbers.

Morgan Stanley also maintained its “outperform” rating and assigned a target price of ₹2,100. The brokerage said that the lender beat its estimates on profit while the net interest margin was in line with estimates.

Jefferies reiterated its “buy” call on the stock with a price target of ₹2,000. The research firm said that the bank’s net profit beat its estimates thanks to lower taxes.

HSBC also maintained its “buy” call on the stock with a price target of ₹1,950. The brokerage said that the near-term earnings estimates remain under pressure.

CLSA also maintained its “buy” call on the private lender raising the target price to ₹2,025 from ₹1,900. The global brokerage firm said that loan growth and asset quality are good.

Price Action: HDFC Bank’s share price was down 5.34% to trade at ₹1,589.50 as the markets opened on Wednesday.

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