Macquarie has an 'outperform' rating on HDFC Bank stock, setting a target price of Rs 1,900 per share, implying an upside of 7 percent from the last close. The brokerage said that HDFC Bank's loan growth for the second quarter of FY25 (Q2 FY25) may potentially fall to below 10 percent year-on-year (YoY).
This slowdown could be due to the base effect and the significant sell-down of Rs 60,000-70,000 crore in loan assets during the quarter, which the bank is reportedly planning. This will also be the first quarter where YoY numbers are comparable following HDFC Bank's merger with HDFC Ltd, providing a more transparent picture of the bank’s growth trajectory.
While the merger has increased the scale and scope of HDFC Bank's retail loan portfolio, managing asset quality and maintaining strong capital ratios remain the key focus areas for investors. To that end, to maintain profitability, HDFC Bank has been moderating its loan-to-deposit ratio (LDR), trying to bring it down to pre-merger levels from a peak of about 110 percent.
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HDFC Bank share price has risen about 16 percent in the last one year to Rs 1,779.85 at the last close, underperforming benchmark NSE Nifty 50. The stock took a hit of about 17 percent during January-February following Q3 FY24 results. It has a market capitalisation of about Rs 13.57 lakh crore, as of the last update
Despite the expected lower loan growth, Macquarie is optimistic about HDFC Bank’s net interest margin (NIM), projecting a 5 basis point (bps) quarter-on-quarter (QoQ) improvement to 3.52 percent in Q2 FY25. In contrast, other banks are likely to report flat or slightly declining margins during this period, said Macquarie.
Nomura's 'neutral' call on HDFC Bank; target Rs 1,720 per share
On the other hand, Nomura has a 'neutral' rating on HDFC Bank stock, with a target price of Rs 1,720 per share, which implies a slight downside from the current price.
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The brokerage has flagged concerns over the loan asset sell-down, which it says could have a negative impact on HDFC Bank's medium-term earnings per share (EPS) and return on equity (RoE). Nomura has cut its EPS estimates for HDFC Bank for FY26-27 by 2 percent.
Nomura said that the securitisation market for loans in India is projected to be around Rs 2 lakh crore in FY25; it added that the planned sell-downs alone could account for 30-35 percent of the market. However, the brokerage remains cautious about whether the market will be able to absorb such large volumes.
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