The shares of India’s largest bank in terms of market capitalization climbed 1.5 percent to Rs 1,655 per share on Friday after Macquarie gave an outperform call on the company with a 28 percent upside.
At 12:55 p.m., On Friday, HDFC Bank shares were trading at Rs 1,653.45, up 1.41 percent from the previous close on the National Stock Exchange.
The company’s shares have delivered a return of around 3 percent in six months and 1.5 percent on a year-to-date basis.
The Bank’s Interest Earned has climbed by 83 percent year on year, rising from Rs 40,929 crore in Q2FY23 to Rs 75,039 crore in Q2FY24. During the same period, net profit has increased by 55 percent from Rs 11,162 crore to Rs 17,312 crore.
Net interest income increased by 30 percent year on year from Rs 21,021 in Q2FY23 crore to Rs 27,385 in Q2FY24 crore. while banks’ total deposits have increased from 29.8 percent from Rs 16,73,408 crore to Rs 21,72,858 crore.
Macquarie has given an “outperform call” rating on HDFC Bank with a target of Rs 2,110 per share with an upside of 28 percent based on Friday’s close price of Rs 1,652 per share.
● The rationale behind providing an outperform rating is that the brokerage expects the bank to attain a target of 4% margin in four years and net interest margins to normalize to 3.7% in 18-24 months.
● The brokerage anticipates an increase in bank retail mix to 54 percent from 46 percent, an increase in CASA from 38 percent to 40-41 percent (pre-merger 42%), and a fall in borrowing mix from current levels of 22 percent (pre-merger levels of 8-9%).
● According to the brokerage, HDFC Bank Management noted that RBI’s action to boost risk weights for unsecured loans was required due to the strong growth predicted by NBFCs and some banks in the market.
● On the pricing front, bank management does not foresee a substantial increase, they expect rates to rise by 25-50 basis points.
● The HDFC Bank acquired Rs 5 trillion in non-deposit liabilities from eHDFC Ltd, and replacing every Rs 1 trillion of e-HDFC liabilities with the bank financing structure can contribute 12 basis points to the bank’s NIMs.
As per the recent shareholding pattern, Foreign institutional investors grew their stake by 18.75 percent in the September quarter, resulting in a 52.12 percent stake, while domestic institutional investors retained 30.64 percent.
The Housing Development Finance Corporation Limited (HDFC) is the largest private sector bank, which is engaged in providing a range of banking and financial services including retail banking, wholesale banking, and treasury operations.
HDFC Bank is one of India’s leading private banks and was among the first to receive approval from the Reserve Bank of India (RBI) to set up a private sector bank in 1994.
As of September 30, 2023, the Bank’s distribution network was at 7,945 branches and 18,183 ATMs across 2,488 cities/towns.
Written by Omkar Chitnis
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