HDFC Bank Q1 Results Review: A Stable Quarter, Strong Asset Quality To Drive Growth
Analysts expect high growth potential arising out of the HDFC-HDFC Bank merger with elevated operating expenditure in near-term.
HDFC Bank Ltd.'s stable first-quarter earnings will help India's largest private lender maintain its high growth potential after the merger with Housing Development Finance Corp., according to analysts.
India's largest private lender's first-quarter net profit rose 29.9% year-on-year to Rs 11,951 crore, according to an exchange filing on Monday. This is marginally higher than the Bloomberg estimate of Rs 11,375 crore. Net interest income increased 21.1% from a year ago to Rs 23,599 crore.
However, the bank's non-performing assets were slightly elevated. The gross NPA ratio rose sequentially to 1.17%, and the net NPA ratio, too, rose marginally to 0.3% as compared with 0.27% quarter-on-quarter.
With HDFC Bank displaying a stable quarter, analysts expect high growth potential arising out of the merger amid elevated operating expenditure in the near term.
Shares of HDFC Bank rose 0.02% to Rs 1,679 apiece as of 11:55 a.m., compared with a 0.09% gain in the benchmark Nifty 50. The stock rose as much as 1.49% intraday to hit Rs 1,704 a share.
Out of the 47 analysts tracking the company, 46 maintain a 'buy' rating, and one recommends a 'hold', according to Bloomberg data. The average 12-month consensus price target implies a potential downside of 20.1%
Here's what the analysts said about HDFC Bank's Q1FY24 results:
Morgan Stanley
Slippages were higher sequentially, driven partly by agricultural loan slippages.
With the liquidity coverage ratio at 120% for the merged entity, we expect an acceleration in loan growth.
Apart from seasonality, slower deposit growth was partly led by wholesale deposits, which declined 2%.
Maintain 'overweight' with a price target of Rs 2,110 per share.
ICICI Securities
HDFC Bank reported a better-than-expected net profit, led by strong other income and lower credit costs.
Further moderation in credit costs is expected as the share of low-risk mortgages is likely to rise to around 35% at the merged entity vs. around 7% at the standalone bank.
Slower-than-expected growth in retail deposits and higher-than-expected operating expenditures are key risks worth monitoring.
Maintain 'buy', with the target price unchanged at Rs 2,000 per share.
Nirmal Bang
Healthy net interest margins and lower credit costs aid the profitability of the bank.
Good capital position, revenue, and cost synergies arising out of the HDFC merger are further likely to aid growth, profitability, and asset quality.
Key minotorables in the near term would be merger transition, elevated operating costs, and margin trajectory.
Maintaining 'buy', with a target price of Rs 2,140 per share.
Motilal Oswal
Loan growth was driven by strong movements in commercial and rural banking and a sequential rise in retail loans.
Estimate the bank to deliver net earnings of Rs 654 billion, Rs 798 billion, and Rs 957 billion over FY24–26, translating into a RoA of 1.9–2.1%.
Healthy provisioning should support asset quality going forward.
Maintain a 'buy' rating with a target price of Rs 2,070, implying an upside of 23%.
