HDFC Bank share declines after BofA downgrades stock to ‘neutral’, cuts target price

HDFC Bank share price were trading in red on Wednesday's session after global brokerage firm BofA downgraded the bank stock from ‘buy’ to ‘neutral’, as quoted by Moneycontrol. The HDFC Bank stock was slightly down, plunged over 0.48 per cent to ₹1,628 per share.

The target price has been lowered from ₹1,850 to ₹1,830 per share, as most of the positive factors are already accounted for.

This downgrade follows a remarkable rally since February, spurred by investor concerns over HDFC Bank's deposit figures after its merger with the former HDFC. Looking ahead, BofA analysts predict a narrow risk-reward range for HDFC Bank's stock over the next 12 months, following its 20 percent rise from February lows, partly driven by index weight optimism.

"We are navigating a tricky FY25 - wherein risk-reward is capped in the near-term. We expect catalysts to start playing out only in FY26. Moreover, a shallow rate cut cycle would delay NIM recovery for HDFC Bank," the brokerage firm said.

According to BofA analysts, a shallow rate cut cycle will postpone the recovery of NIM, with significant catalysts likely emerging only in FY26.

BofA anticipates that the stock's risk-reward profile will remain within a narrow range over the next 12 months.

Recently, HDFC Bank released a business update for the quarter ending in June (Q1FY25). The private sector lender's deposit base increased by 24.4 percent year-on-year to ₹23.8 lakh crore in Q1, though it remained flat sequentially. Excluding the impact of the merger, deposits grew by 16.5 percent over the past year.

The bank reported that average deposits increased by a robust 4.6 per cent quarter-on-quarter, while average AUM rose by 0.8 per cent quarter-on-quarter. This growth is largely attributed to a significant accumulation of deposits toward the end of the previous quarter (Q4), a typical trend for Q4. Consequently, the average base figure for deposits should be considered somewhat inflated.