HDFC Bank’s share price fell more than 3% in early trading on Friday after the private lender reported a sequential decline in both advances and deposits in its Q1 business update. The share price of HDFC Bank fell 4,23% to intra-day low of Rs 1654 per share on NSE.
The bank, which is the largest private sector lender in the country, saw its advances drop 0.8% quarter-on-quarter (QoQ) to Rs 24.87 lakh crore at the end of June 2024, down from Rs 25.1 lakh crore at the end of March 2024.
This decline was primarily due to the continued shedding of the low-yielding corporate book, including that of the erstwhile HDFC Ltd. However, on a year-on-year (YoY) basis, HDFC Bank’s advances grew by 52.6%, rising from Rs 16.30 lakh crore.
Deposits for Q1FY25 stood at Rs 23.79 lakh crore, marking a 24.4% increase from Rs 19.13 lakh crore YoY, but remained flat compared to Rs 23.79 lakh crore as of March 31, 2024. Excluding the impact of the July 2023 merger, the bank’s deposits grew by 16.5% over the period ending June 30, 2023, according to a regulatory filing by HDFC Bank.
The bank’s low-cost deposits, or current and savings accounts (CASA), ratio as a proportion of total deposits fell to 36.3% at the end of June 2024 from 38.2% at the end of March 2024. CASA deposits increased by 6.2% YoY to Rs 8.63 lakh crore from Rs 8.13 lakh crore, but declined nearly 5% QoQ from Rs 9.09 lakh crore.
Additionally, the liquidity coverage ratio improved to 123% in Q1, compared to 115% in the previous quarter.
Earlier this week, HDFC Bank’s share price reached a record high of Rs 1,791.90 per share on the BSE, driven by expectations of significant passive fund inflows amid a likely increase in the bank’s weightage in the MSCI index.
The latest shareholding pattern of HDFC Bank showed that foreign institutional investors’ (FIIs) ownership in the bank dropped below 55%, which is expected to boost the bank’s stock weightage in the MSCI index, leading to higher passive inflows.
Brokerages on HDFC Bank
Jefferies on HDFC Bank.
Jefferies has maintained a “Buy” rating for HDFC Bank with a target price of Rs 1880 per share. In its Q1 pre-quarter update, Jefferies noted that the bank’s deposit mobilization was slightly disappointing.
However, retail and SME rural loans were highlighted as the primary drivers of growth. Key factors to watch in the upcoming results include the overall results, deposit trends, net interest margin (NIM), and operating expenses (Opex).
Nomura on HDFC Bank
Nomura has maintained a neutral call on HDFC Bank with a target price of Rs 1660. In its report, Nomura noted that deposit growth generally tends to be soft in Q1, with loans and deposits showing 1-3% quarter-on-quarter growth over the last three years.
However, the reported numbers this time are slightly lower than usual. The Net Credit Ratio (NCR) also saw a sharp quarter-on-quarter decline, with average deposit growth at 4.6% QoQ. The report suggests some moderation in core Net Interest Margins (NIMs) in Q1FY24.
Macquarie on HDFC Bank
Macquarie has highlighted that HDFC Bank is experiencing a seasonally weak quarter, with all eyes on margins. The decline in deposit growth is attributed to seasonality in the Current Account and Savings Account (CASA) segment.
Additionally, a decline in corporate and wholesale loans has led to flat growth, aligning with the bank’s strategy of improving its product mix. Despite these factors, Macquarie expects the Net Interest Margins (NIMs) to remain broadly unaffected. These insights are from Macquarie’s latest report on HDFC Bank.
Motilal Oswal On HDFC Bank
Motilal Oswal has maintained a “Buy” rating on HDFC Bank with a target price of Rs 1727 per share. In its 1QFY25 business update, Motilal Oswal noted several key takeaways: The loan book grew by 52.6% year-on-year (YoY) to Rs 24.9 trillion, though it declined by 0.8% quarter-on-quarter (QoQ).
Excluding the impact of the merger, gross advances grew by 14.9% YoY. Domestic retail loans saw a significant increase of 94.6% YoY and 1.5% QoQ, while commercial and rural banking grew by 26.4% YoY and 0.9% QoQ. Conversely, other wholesale loans declined by approximately 1.1% YoY and 6.2% QoQ.
Deposits grew by 24.4% YoY to INR 23.8 trillion, remaining flat QoQ. Excluding the merger impact, deposits grew by 16.5% YoY. CASA deposits rose by 6.2% YoY but declined by 5% QoQ, while term deposits increased by 37.7% YoY and 3% QoQ to Rs 15 trillion.
The current account saw a QoQ decline of 13.7% but grew by 6% YoY. The liquidity coverage ratio (average) was around 123% for the quarter. These insights are from Motilal Oswal’s latest report on HDFC Bank.
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