HDFC Bank Share Price Highlights October 21, 2024: HDFC Bank shares jump 3% on Q2 results and IPO nod for HDB Financial

The Gross NPA ratio declined marginally 3 bps to 1.36 per cent. Slippages remained flat sequentially. This needs to be viewed in the context of peers such as Kotak Mahindra Bank reporting stress in pockets such as unsecured books. The calibrated approach to loan growth induced by the elevated LDR, puts the bank in a unique position to pick and choose loan applications, prioritising quality and pricing over raw growth. This is conducive to the bank’s prospects in the long term.

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During the quarter gone by, term deposits grew much quicker than CASA (current account savings account) balances – 19.3 per cent year on year vis-à-vis 8 per cent. CASA ratio declined to 35.3 per cent from 36.3 per cent as of the preceding quarter. The cost of funds stood at 4.9 per cent unchanged from that of Q1 FY25 and the yield on assets stood at 8.3 per cent with a minor cut of 10 bps sequentially.

To keep up the momentum in deposits, the bank wishes to cushion itself with a higher magnitude of high-quality liquid assets. Hence the LCR (liquidity coverage ratio) during the quarter moved up 500 bps to 128 per cent from Q1 FY25.

bl Research Bureau reports

Top gainers on the NSE 

Bajaj Auto (4.34%), HDFC Bank (2.57%), Asian Paints (1.70%), M&M (1.17%), Eicher Motors (0.68%) 

Top losers: 

Tata Consumer Products (-7.08%), Kotak Mahindra (-4.73%), Bajaj Finserv (-3.37%), BPCL (-3.36%), IndusInd (-3.03%) 

HDFC Bank (HDFCB IN) earnings were ahead of our estimates on lower credit cost (provision write-back & lower coverage) even as core was in line. Q2 was characterized by 1) slower loan growth outcome of 7% YoY, 2) steady NIM, 3) a sharp decline in the CD ratio at sub-100%, down 375bp QoQ, 4) rising LCR of 128%, and 5) steady asset quality outcomes with slippages of 1.3%. We have been debating about HDFCB’s conundrum to manage growth vs NIM vs LCR vs CD ratio outcome, which are likely to cause dislocation. Management stance of accelerating the CD ratio adjustment and positioning for the next cycle implies the bank will undergo an elongated period of balance sheet realignment with sustained lower growth, and, thus, near-term outcome would be onerous. We are still away from bottoming of core earnings, and the stock may see time correction. We reiterate Accumulate with a revised TP of INR 1,898 based on a SOTP method

Shares of HDFC Bank traded at ₹1,730.35 on the NSE, higher by 2.88% as at 3.07 pm.

Top gainers on the NSE as at 3 pm:

Bajaj Auto (4.36%), HDFC Bank (2.88%), Asian Paints (1.83%), Tech Mahindra (0.94%), M&M (0.93%) 

Top losers: 

Tata Consumer Products (-6.99%), Kotak Mahindra (-4.36%), Bajaj Finserv (-3.46%), IndusInd (-2.99%), BPCL (-2.80%)

HDFC Bank came up with results for the quarter ended September 2024 on Saturday. The numbers were accompanied by an update that the board has approved the IPO of the subsidiary HDB Financial Services. It will be an OFS (offer for sale) of ₹10,000 crore plus a fresh issue of ₹2,500 crore. As per RBI’s mandate, the NBFC must be listed by September 2025.

Loan-deposit ratio

The bank reported a steady and in-line set of numbers. To address the elephant in the room first, the banks’ LDR (loan to deposits ratio) has improved to 100.8 per cent from 104.5 per cent as of the quarter ended June 2024. This was aided by securitisation and calibrated loan growth, apart from strong deposit growth. The loan book grew at 7 per cent year on year, while the deposits grew at a faster 15 per cent. The bank has gained market share in deposits as the system growth rate for the quarter came in at a lower 11 per cent.

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Company Outlook: The management has clearly highlighted its focus on reducing its LDR to premerger levels adopting an accelerated approach, resulting in a significantly slower credit growth vs deposit growth. HDFCB does not intend to disturb the deposit growth momentum that has picked up in the current quarter. The management remains confident of maintaining NIMs in a tight range on a steady state basis, despite ~70% of the book being EBLR-linked (primarily repo-linked). We expect HDFCB to deliver RoA/RoE of 1.8-1.9%/14-16% over FY25-27E, supported by gradually improving cost ratios and steady credit costs. 

Current Valuation: 2.3x Sep’26E ABV; Earlier Valuation: 2.4x FY26E ABV Current TP: Rs 2,025/share; Earlier TP: Rs 1,950/share 

Recommendation: We maintain our BUY recommendation on the stock.

Axis Securities

HDFC Bank emerged as the top gainer, rising 3.30 per cent after reporting a 5 per cent increase in quarterly profits. Other notable gainers included Bajaj Auto gaining 3.15 per cent, Asian Paints up 1.12 per cent, Tech Mahindra adding 0.76 per cent, and Eicher Motors advancing 0.74 per cent. 

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Shares of HDFC Bank gained 3.13% on the NSE to ₹1,734.55 as at 1.15 pm.

We estimate HDFCB to report gradual recovery in loan growth over FY25- 27E with earnings growth accelerating faster. We thus estimate HDFCB to deliver FY26E RoA/RoE of 1.8%/14.6%. We reiterate our BUY rating with a TP of INR2,050 (2.4x Sep’26E ABV + INR295 for subs).

LDR aspects still portend a long walk to freedom

Loan growth slowing to 7% YoY demonstrates LDR considerations have had a material impact

We maintain a recent, relatively cautious ADD rating with a revised price target of Rs 2000: We value the standalone bank at 2.3x FY26 P/BV for an FY25/26/27E RoE profile of 15.0/15.5/15.7%. We assign a value of Rs 260 per share to the subsidiaries.

Shares of HDFC Bank gained 3.14% on the NSE to trade at ₹1,734.70 as at 12.20 pm.

Top gainers on the NSE as at 12.13 pm:

HDFC Bank (3.14%), Bajaj Auto (2.78%), Asian Paints (0.97%), Tech Mahindra (0.84%), Eicher Motors (0.78%)

Top losers:

Tata Consumer Products (-7.36%), Kotak Mahindra (-5.75%), BPCL (-3.37%), IndusInd (-3.18%), Bajaj Finserv (-2.35%)

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HDFC Bank board approves launch of IPO its NBFC subsidiary HDB Financial Services

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Large-size private banks, including HDFC Bank, Axis Bank and Kotak Mahindra Bank, have seen a de-growth in their corporate loan book in Q2FY25, largely due to pricing issues and as lenders target higher yielding corporate bonds and other small and medium enterprises (SME) loans, senior bankers say.

“Yes, wholesale loans were down this quarter by 2.8 per cent (sequentially). The right kind of pricing is very important. We have seen that pricing has not kept pace with policy rates which have been raised by 250 basis points (bps),” said HDFC Bank CFO Srinivasan Vaidyanathan.

HDFC Bank’s corporate and other wholesale loans de-grew 3 per cent quarter-on-quarter (QoQ) and 12 per cent year-on-year (YoY) to ₹4.67 lakh crore. Likewise, Axis Bank’s corporate loans was slightly down around 0.1 per cent Q-o-Q at ₹2.90 lakh crore. Kotak Mahindra Bank’s corporate loans were down 1 per cent QoQ at ₹93,581 crore,whereas Karur Vysya Bank’s corporate loans were down 4 per cent QoQ and 9 per cent YoY at ₹13,088 crore.

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Tech Mahindra emerged as the top gainer on the NSE, surging 3.16 per cent in early trade, followed by HDFC Bank which rose 2.80 per cent after reporting a 5 per cent year-on-year increase in Q2 net profit to ₹16,821 crore.

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The board of HDFC Bank has approved share sale worth ₹12,500 crore comprising ₹10,000 crore offer-for-sale (OFS) related to its subsidiary HDB Financial Services. The initial public offering (IPO) will be for such number of equity shares of face value of ₹10 each of HDB Financial Services, aggregating up to ₹12,500 crore comprising a fresh issue of ₹2,500 crore and an OFS aggregating up to ₹10,000 crore, HDFC Bank said in a regulatory filing. The price and other details of the proposed IPO will be determined in due course by the competent body, it said.

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India Daybook – Stocks in News 

HDFC Bank: Board approved the Offer for Sale of equity of upto ₹10,000 cr from HDB Financials during IPO (Positive) 

HDFC BANK 2Q (IN-LINE): NII +10% | PPOP +9% | PAT +5% | NII, PPOP INLINE; MARGINS DIP 1BP QOQ | PAT SLIGHTLY BEAT ESTIMATES

• HDFCB reported 2QFY25 profit at INR168.2b (inline).
• NII grew 10% YoY to INR301.1b (inline). Core NIMs (on total assets) declined 1bp QoQ to 3.46%.
• Other income stood at INR114.8b (7% YoY growth, inline).
• Treasury gains declined to INR2.9b vs INR10.4b in 2QFY24.
• Total revenues thus grew 9% YoY to INR416b (inline).
• Operating expenses grew 9.7% YoY to INR168.9b (inline). C/I ratio stood at 40.6%.
• PPoP grew 9% YoY to INR247.1b (inline).
• Advances book grew 7% YoY / 1% QoQ to INR24.95t; Deposits grew 15% YoY / 5% QoQ to INR25.0t. CD ratio declined to 99.8% while CASA mix stood at 35.3%.
• GNPA/NNPA ratio increased by 3bp/2bp QoQ to 1.36% / 0.41% respectively. PCR decreased 131bp QoQ to 69.9%. Provisions declined 7% YoY to INR27b (5% higher than MOSLe).
• CAR stood at 19.8% with Tier-1 ratio of 17.8% and CET-1 of 17.3% (up 50bp QoQ).

• GS on HDFC Bank: Maintain Buy on Bank, target price at Rs 2156/Sh (Positive)
• Bernstein on HDFC Bank: Maintain Outperform on Bank, target price at Rs 2100/Sh (Positive)
• MOSL on HDFC Bank: Maintain Buy on Bank, target price at Rs 2050/Sh (Positive)
• JP Morgan on HDFC Bank: Maintain Neutral on Bank, target price at Rs 1750/Sh (Neutral)
• Investec on HDFC Bank: Maintain Hold on Bank, raise target price at Rs 1650/Sh from Rs 1625/Sh (Neutral)

Private sector major HDFC Bank on Saturday reported 5 per cent year-on-year (y-o-y) and 4 per cent quarter-on-quarter (q-o-q) growth in Q2FY25 net profit at ₹16,821 crore, aided by higher net interest income (NII).

The lender’s NII grew 10 per cent y-o-y to ₹30,110 crore,other income rose 7 per cent to ₹11,480 crore,whereas net interest margin (NIM) stood flat q-o-q at 3.5 per cent. The bank is in a “reasonable” range of NIM as of now, CFO Srinivasan Vaidyanthan said at a post earnings conference.

Deposit mobilisation

Apart from the bank’s NIM — which fell from over 4 per cent level after it concluded merger of erstwhile HDFC with itself — analysts have been closely tracking HDFC Bank’s deposit mobilisation guidance as its credit-deposit (CD) ratio is near 100 per cent level.

“On an incremental basis, historically we have seen 15-18 per cent (growth in deposit), which will give you about 50-70 basis points (bps) market share growth which we have seen over 3-5 year period...that is the kind of positioning we have put the bank in, to keep gaining this market share...,” the CFO said.

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HDFC Bank shares gained 3.33% on the NSE to trade at ₹1,737.90 as at 10.06 am.

Top gainers on the NSE as at 9.30 am: 

Tech Mahindra (3.16%), HDFC Bank (2.80%), SBI Life (1.58%), HDFC Life (1.40%), Asian Paints (1.15%) 

Top losers: 

Tata Consumer Products (-6.70%), Kotak Mahindra (-3.66%), BPCL (-1.88%), Bharti Airtel (-1.46%), IndusInd (-1.27%)