HDFC Bank witnessed a substantial decline in its share price on Thursday, experiencing a dip of up to 3.7% to reach the day’s low at Rs 1,480 on the Bombay Stock Exchange. Despite Wednesday’s market downturn, the bank struggled to attract enough buyers to offset the losses. Over the past two trading days, the stock has encountered a market capitalization reduction of approximately Rs 1.3 lakh crore, marking a 12% decrease since the previous day.
As of 11:29 AM, HDFC Bank shares were trading at Rs 1,504.30, reflecting a decrease of Rs 33 or 2.12% on the Bombay Stock Exchange. A notable portion of the Nifty and Sensex decline today can be attributed to the weak performance of HDFC Bank shares, constituting more than one-third of the total decline, as reported by ET.
Investor apprehensions regarding the private sector lender primarily revolve around its stagnant net interest margin (NIM) on a quarter-on-quarter (QoQ) basis, despite the withdrawal of the ICRR and a substantial decrease in the LCR to 110%. The deposit growth has fallen short of expectations.
Following the significant correction, Jefferies, a global financial services firm, has noted that the valuation of HDFC Bank is now at an intriguing level of 2.1x FY25E adj. PB and 14x PE. Prakhar Sharma from Jefferies emphasized that the growth in earnings per share (EPS), which witnessed a 2% YoY decline in 3Q, hinges on NIM expansion and will play a pivotal role in stock movements. For FY25, Jefferies anticipates a 16% surge in loans, a 17% increase in deposits, and a 10bps YoY expansion in NIMs, resulting in an EPS of Rs 95.
Despite adjusting earnings estimates for loan growth and NIMs for FY25-26, Jefferies maintains a positive outlook, projecting a decent 16% YoY growth in loans for FY25, a 17% rise in deposits, and a 10bps YoY expansion in NIMs.
Nomura, a global broking firm, has downgraded HDFC Bank’s stock to a neutral rating and lowered NIM estimates by 15 bps across FY25-26. The bank is grappling with challenges related to funding mix improvement and faces a more extended-term narrative. Consequently, Nomura has reduced FY25-26F PAT by ~6% and lowered the return on assets (RoA) to 1.7%.