HDFC Bank: In early trade on Wednesday, HDFC Bank’s shares fell by more than 3%, bringing its market capitalization (m-cap) below the Rs 12 lakh crore threshold. The third-most valuable Dalal Street stock dropped 3.3% to a low of Rs. 1,575.15 on the BSE, and its market capitalization dropped to Rs. 11,95,013.88 crore from Rs. 12,34,104 crore on Monday. On Tuesday, stock market were shut.
As analysts accounted for bad shocks in the wake of the lender’s analyst meeting, they revised their target prices downward, which caused the stock to decline.
As a result of a decline in the merged bank’s net value brought on by policy harmonisation and accounting changes, analysts significantly reduced their predictions for FY24 and FY25. An surge in non-performing loans (NPLs) worried them.
Concern in future
According to InCred Equities, HDFC’s non-individual loan book would be cause for concern in the near future. According to the report, excessive liquidity would continue to put pressure on margins in FY24. According to Nirmal Bang Institutional Equities, the 18% YoY fall in HDFC’s wholesale book has caused the loan growth of its merged affiliate, HDFC Bank, to decelerate to 13%. This book will be further reduced by the management in FY24 before it starts to expand once more in the upcoming years.
“After incorporating these developments into our merged entity pro-forma estimates, we have cut our FY24E and FY25E earnings estimates by 11.9 per cent and 7.9 per cent, respectively. Consequently, we have revised our target price to Rs 1,935. While in the near term, the bank’s financials face volatility due to merger related adjustments, we are positive about HDFC Bank over the long term,” it said.
Non-performing loans in the parent business were greater than expected
The non-performing loans in the parent business were greater than expected, according to Kotak Institutional Equities, but more unfavourable surprises should be limited.
Given that the private lender needs to complete the NIM change and develop its thesis of merit, which the brokerage is still less clear about, it appears that a re-rating for HDFC Bank will take some time. This brokerage firm’s target price for HDFC Bank has dropped from Rs. 1,925 to Rs. 1,850.
Stock rating reduced to ‘neutral’ by Nomura India. It stated that net worth adjustments will reduce its estimated book value per share for FY24 by 4%. On the basis of excess liquidity and accounting changes, it predicts NIM drops of 25 basis points in FY24 and 15-20 basis points in FY25-26.
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