HDFC Bank share price extends decline; stock falls over 7% this week
- HDFC Bank share price has fallen over 4% this year so far underperforming the Bank Nifty index which has gained more than 5% YTD.
HDFC Bank share price extended decline for the third straight session on Thursday amid heavy selling in the banking heavyweight. HDFC Bank shares fell as much as 1.65% to ₹1,538.05 apiece on the BSE.
HDFC Bank stock has lost more than 7% this week so far.
Selling in HDFC Bank shares comes on the back of mixed brokerages views on the stock after the country’s largest private-sector bank, in an analyst call, shared particulars of the merged entity.
The lender pointed out the possibility of a worsening of net interest margin (NIM), net worth and asset quality in the short term following its merger with parent Housing Development Finance Corporation (HDFC).
Foreign brokerage firm Nomura downgraded its rating on HDFC Bank to ‘Neutral’ and cut the target price to ₹1,800 per share from ₹1,970 earlier.
“Downward adjustment to the incoming net worth of HDFC Ltd (largely due to IGAAP accounting and provisioning harmonization) amounts to a BVPS cut of ₹23 per share for the merged entity,” Nomura said.
It expects NIMs could see pressure over the next 2- 3 quarters as HDFC Ltd’s Q2FY24 opening book NIMs are at 2% versus 2.7% in Q1. This is mainly on account of excess liquidity being carried post-merger.
Nomura has cut its NIM estimates by 25 bps in FY24 and 15-20 bps in FY25-26.
“Our FY24F EPS has been cut 9%, with ~5% cuts in FY25-26F. Our FY24 RoA estimate is now at 1.7% (vs 1.9% earlier), gradually improving to 1.8% in FY25-26F,” Nomura said.
Goldman Sachs reiterated a ‘buy’ call on the stock with a target price of ₹2,051 per share as it believes HDFC Bank is well placed to gain substantial market share in both lending and deposits over the next few years, thanks to its expanding distribution network and its strong focus on cross-selling to existing customers.
Meanwhile, domestic brokerage firms, Motilal Oswal Financial Services has a buy call on the HDFC stock with a target price of ₹1,950 per share.
Motilal Oswal believes that the HDFC-HDFC Bank merger will enable HDFC Bank to build a more diversified and robust franchise.
HDFC Bank share price has fallen over 4% this year so far underperforming the Bank Nifty index which has gained more than 5% YTD.
At 10:05 am, HDFC Bank shares were trading 0.43% lower at ₹1,557.20 apiece on the BSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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