The share price of HDFC Bank rose by more than a percent in early trade on Monday as the country’s largest private sector bank posted earnings for the fiscal first quarter ending June 2024. HDFC Bank shares gained in an otherwise lackluster market as the benchmark Nifty 50 dropped half a percent, while the Bank Nifty was down 0.6%.
HDFC Bank’s net profit in Q1FY25 was ₹16,175 crore, down 2% from the previous quarter’s ₹16,512 crore. In the June quarter, the bank’s Net Interest Income (NII) increased by 2.6% to ₹29,837 crore from ₹29,078 crore in the March quarter. Additionally, the net interest margin (NIM) increased by 3 basis points QoQ to 3.47%.
In the June 2024 quarter, asset quality declined as gross non-performing assets (NPAs) increased by 6% to ₹33,026 crore and net NPAs increased by 17.5% to ₹9,508.4 crore. The gross NPA ratio jumped 9 basis points quarter on quarter to 1.33%, while the net NPA ratio increased 6 basis points to 0.39%.
Here’s what brokerages are saying about HDFC Bank Q1 earnings and HDFC Bank stock:
The Motilal Oswal
HDFC Bank performed comparably, with a modest margin improvement and controlled provisions. Business growth was sluggish in the first quarter, with loan growth falling 1% QoQ mainly to wholesale. We expect loan growth to moderate in FY25 and FY26E. However, the progressive retirement of high-cost borrowings, along with an increase in operating leverage, will help return ratios in the coming years, according to Motilal Oswal.
Over FY24-26, the brokerage firm expects HDFC Bank to grow deposits at a 16% CAGR while loans grow at a slower 10.1% CAGR. The lender is expected to generate a RoA and RoE of 1.9% and 15.1%, respectively, in FY26.
Motilal Oswal maintains a ‘Buy’ recommendation on Bank shares, with a target price of ₹1,850.
Antique Stock Brokerage
According to Antique Stock Broking, despite such a massive merger, key profitability and asset quality parameters like NIM, cost to income, GNPA, and RoA have remained range-bound, with an improved trend in the recent few quarters, demonstrating the bank’s resilience. As a result, the brokerage company is optimistic about the bank, expecting it to achieve a RoA of 1.8% – 1.9% and a RoE of 15% – 16% in FY25-27E.
Antique Broking stated that HDFC Bank must demonstrate that it can sustainably grow its margins despite modest loan growth compared to deposits. Overall, it cut FY25 and FY26 earnings expectations by 3% while maintaining FY27 estimates.
The brokerage company maintains a ‘Buy’ recommendation for HDFC Bank shares, with an unchanged target price of ₹1,900 per share.
Emkay Global
According to Emkay Global, HDFC Bank missed on deposit growth in Q1FY25 after a fantastic surge in Q4FY24 due to run-downs in its CA pool and an intentional run-down in bulk deposits.
The brokerage reduced its credit growth forecasts for FY25-27 to 10-12% from 12-14%, partly offset by lower credit costs, resulting in a 2-6% earnings drop. The analyst maintained a ‘Buy’ recommendation for HDFC Bank stock, with a target price of ₹2,000 per share.
It expects increased deposit mobilization and HDB Financial Services’ IPO to be significant near-term monitorables.
At 9:20 a.m., HDFC Bank shares were trading at ₹1,618.10 on the BSE, up 0.68%.
