BackHDFC Bank shares fall for 9th straight session. Good time to buy?
HDFC Bank's Q4 standalone net profit jumped 23% led by lower provisions
PremiumShares of HDFC Bank continued to fall in Tuesday's early deals by plunging more than 2% to ₹1,362 apiece on the BSE, marking its ninth straight session of loss. The bank's stock is down about 9% as compared to a 3% fall in benchmark Sensex in the last five trading sessions.
HDFC Bank's Q4 results came below estimates. The private lender reported a 23% jump in Q4 standalone net profit, led by lower provisions, even as other metrics like net interest income (NII) came in below expectations.
Earlier this month, Mortgage financier Housing Development Finance Corporation announced that it will merge with its subsidiary HDFC Bank, creating a financial behemoth. The merger is subject to regulatory approvals.
"HDFC Bank and HDFC Ltd. have fallen more than 20% from their respective highs post-merger news. HDFC Bank's results were below expectations due to pressure on NIMs. However, we believe that the strong liability fortress of the bank and asset quality record is a huge competitive advantage over its peer banks. We believe that the merger is positive for both entities in the long run. Thus, we suggest investors buy HDFC twins on dips to play on the private capex revival, economic growth," said Santosh Meena, Head of Research, Swastika Investmart Ltd.
The bank’s net interest income (NII), difference between interest earned and interest expended, grew 10% to ₹18,872 crore. Its provisions declined 29% from the year-ago quarter whereas net interest margin, a key measure of profitability, was down 20 bps YoY and 10 bps QoQ at 4%.
“HDFC Bank's growth in Q4 was seen in the products of every segment. The merger with HDFC Ltd is also going to benefit the bank in the long term. However, due to overall correction in the broader indices, HDFC Bank is also witnessing some profit booking. Investors may enter the stock around 1,350 levels for the target of 1,650 levels in near term," said Ravi Singh-Vice President and Head of Research-ShareIndia.
"Post-merger announcement and Q4 results the stock has overreacted and is trading down from last few days. Overall Q4 numbers were not so bad with healthy loan growth in all the segments supported by improved asset quality. Considering all the factors like merger benefits and MSCI Index adjustment, we recommend investors to use these dips to accumulate HDFC Bank," said Prashanth Tapse, Research Analyst and VP Research at Mehta Equities.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
