HDFC Bank Ads Down Today: Is There More Pain Ahead? HDFC Bank ADRs fell 8% after leading the carnage on D-Street.
The stock suffered its biggest decline in more than two years and suffered a loss of Rs 1 billion after the company’s third-quarter results failed to impress investors.
Many brokerages have lowered their price targets after disappointing December quarter results. However, it remains the best purchase for many people in the long run.
Ajit Kabi, research analyst at LKP Securities, said, “The third quarter performance appears to be at a similar level. However, the high corporate debt restructuring (110%) and liquidity coverage ratio (110%) are causes for concern.”
HDFC Bank beat profit estimates in the third quarter with 33% year-on-year growth, but this was mainly driven by a one-time tax provision write-off of Rs 1,500 crore.
Private sector lenders also reported lower margins for the second consecutive quarter. Core net interest margin (NIM) relative to total assets fell from 3.65% to 3.4% in the previous quarter.
Before its merger with parent Housing Development Finance Corporation (HDFC) in July last year, the bank’s margins were above 4%. Brokerage Jefferies said margins were a “key miss” and higher retail deposit mobilization and lending would be key to boosting NIM. .
On an analyst call, company executives hinted at continued competitive pressures on deposit growth due to liquidity constraints. In the medium term, we believe that a higher contribution of retail assets to our overall asset mix will help normalize margins to higher levels.
“Low liquidity coverage ratios and slowing deposit growth may limit NIM expansion in the future. We believe the Street is concerned about the above factors. Nevertheless, we may witness a recovery in the coming days. We are targeting 12-month targets. “We set the price at 1700. The upside is 11%,” Kabi said.
HDFC Bank shares closed 8.16 per cent lower at Rs 1,542.15 on NSE on Wednesday. Over the past year, the stock has returned minus 5.8%.
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