HDFC Bank share price cracks over 8% after Q3 results, erases over a lakh crore in m-cap; what should investors do?

HDFC Bank share price cracked 8.46 per cent to close at ₹1,536.90 BSE on Wednesday, January 17, a day after the company reported its December quarter results. HDFC Bank share price opened at ₹1,583.85 against its previous close of ₹1,678.95 and cracked over 9 per cent to hit the intraday low level of ₹1,527.25.

The market capitalisation of the stock dropped by nearly over a lakh crore in a single day to ₹11.7 lakh crore. 

Meanwhile, HDFC Bank's US-listed shares fell 6.71 per cent on NYSE after the Q3 results.

HDFC Bank on Tuesday reported a 33 per cent jump in its net profit at ₹16,372 crore in Q3 of FY24, as compared to ₹12,259 crore a year ago.

Its net interest income (NII) rose to ₹28,471 crore in Q3 of FY24 from ₹27,385 crore in the previous quarter. The core net interest margin was unchanged sequentially. It rose 3.4 per cent on total assets and 3.6 per cent on interest-earning ones year-on-year.

HDFC Bank’s gross non-performing assets (NPAs) were reported at 1.26 per cent in Q3 of FY24, up from 1.23 per cent last fiscal year. Net NPAs in Q3 of FY24 stood at 0.31 per cent, as compared to 0.33 per cent last year.

HDFC Bank share price declined on Wednesday even as the bank reported in-line Q3 numbers. Analysts pointed out that investors appear to be concerned about the Q3 margins which came largely flat.

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A majority of brokerage firms retained their positive views on HDFC Bank after its December quarter earnings. However, some of them have trimmed their estimates for the short-to-medium term. 

Here's what top brokerage firms said about HDFC Bank stock after the Q3 results:

Motilal Oswal Financial Services

Motilal Oswal has reiterated its buy rating on HDFC Bank stock with a target price of ₹1,950.

The brokerage firm underscored that HDFC Bank reported in-line earnings led by healthy other income and steady loan growth.

Also Read: Small is beautiful for HDFC Bank on margin path

Margins stood largely flat (slightly below our expectations) even as the bank deployed excess liquidity and significantly drew down the LCR (liquidity coverage ratio). Loan growth was healthy driven by growth in retail and continued traction in commercial and rural banking. Asset quality ratios improved while PCR (provisioning coverage ratio) also inched up to nearly 75 per cent, Motilal Oswal pointed out.

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The bank has continued to maintain a 0.6 per cent buffer of floating + contingent provisions, which provides additional comfort. Management suggested that NIMs will improve gradually over the coming years, along with an improvement in operating leverage will enable the bank to deliver healthy return ratios, said the brokerage firm.

"We estimate HDFC Bank to deliver faster deposit growth at 19 per cent CAGR while loan growth to sustain at 17 per cent CAGR over FY24-26. We thus estimate HDFC Bank to deliver an FY26E RoA (return on assets) and RoE (return on equity) of 1.9 per cent and 16.7 per cent respectively," said Motilal Oswal.

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Nirmal Bang Institutional Equities

Nirmal Bang is positive on HDFC Bank from a long-term perspective due to its high growth potential on account of good capital position, revenue and cost synergies arising out of the HDFC merger and best-in-class asset quality.

However, the brokerage firm added that in the near term, successful merger transition, elevated operating costs due to continued expansion and margin trajectory will be the key monitorables.

The brokerage firm has a buy call on the stock with a target price of ₹1,994.

"We are valuing HDFC Bank at 2.7 times December 2025E ABV (adjusted book value) as against (2.75 times September 2025E P/ABV) and adding subsidiary value per share of ₹180, we maintain our target price at ₹1,994 and rating as buy," said Nirmal Bang.

Kotak Institutional Equities

Kotak maintained a buy rating on the stock and raised the fair value to ₹1,860 from ₹1,800, valuing the bank at 2.5 times book for RoEs (return on equities) at nearly 16-17 per cent levels.

"HDFC Bank’s reported earnings print was marginally weak as operating profit growth drivers appear to be less sustainable and the bank reported higher provisions. While NIM appears to have bottomed at 3.4 per cent, the drivers for NIM expansion appear to be slower than forecast, resulting in cuts to our earnings," Kotak said.

Kotak believes the bank needs more time to deliver best-in-class return ratios.

"We are building a marginally better loan growth than the industry average given its size. In a benign credit cost environment, we are yet to see a key differentiation in underwriting across the top banks," Kotak said.

"We are not too comfortable building an investment thesis on relative operating profit growth as the valuation differential is not conducive to making this argument. We see HDFC Bank as a bank that is likely to deliver stable earnings growth and valuations are attractive at this point," said Kotak.

Nuvama Wealth Management

Nuvama has downgraded the stock to a ‘hold’, cutting the multiple by 5 per cent to 2.4 times one-year forward BV (book value). The brokerage firm has also reduced the target price to ₹1,730 from ₹1,770.

"HDFC Bank remains the strongest banking franchise in India in our view, but the earnings narrative will overwhelm in the short to medium term," said Nuvama.

"We are cutting earnings by 5–6 per cent for FY25E–FY26E. While the cut in core earnings is higher at 8 per cent due to a nearly 4 per cent cut in loan growth, it is partially offset by an upward revision of non-core items. The bank has exhausted its LCR, will need to lower its LDR (loan-to-deposit ratio) and is running slower than guidance on deposit growth," said Nuvama.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.