In a stellar exhibition of financial prowess, HDFC Bank Ltd, following its amalgamation with HDFC, has unveiled an astounding 51% year-on-year upswing in net earnings, scaling to Rs 15,976 crore for the quarter ending in September. This revelation has exceeded the anticipations of the financial realm, rippling shockwaves across the industry. While this tidings have elicited a gamut of responses from analysts, it unequivocally underscores the bank’s formidable potential for expansion.
The merger with HDFC stands as a pivotal element contributing to the bank’s extraordinary fiscal feat. Even though the bank’s net interest margin (NIM) experienced a marginal dip to 3.6%, just falling short of the bank’s anticipated range of 3.7-3.8% post-merger, this diminishment was eclipsed by the extraordinary spike in net profits. HDFC Bank’s robust expansion in loans and substantial accumulation of deposits have firmly entrenched it for future triumph.
#2QWithCNBCTV18 | HDFC Bank reports Q2 profit at Rs 15,980 cr
— CNBC-TV18 (@CNBCTV18Live) October 16, 2023
Numbers are no comparable on a QoQ or YoY basis due to the merger pic.twitter.com/o28OGPoWil
Antique Stock Broking has recognized the bank’s robust momentum in loan growth, manifesting as a 5% quarterly escalation and an imposing 13% annual surge. It has underscored the significance of vigilance regarding the post-merger liability dynamics, given that the loan-to-deposit ratio has now reached 107%. However, the bank’s substantial provisioning has instilled a sense of confidence, leading Antique Stock Broking to elevate its target valuation for the stock to Rs 1,975.
Conversely, certain brokerage firms have exhibited prudence in their analysis. For instance, CLSA revised its stock valuation target downward to Rs 2025 from Rs 1,900. The brokerage has voiced apprehension over the ambiguity surrounding the timeline for NIM to attain a sustainable equilibrium. Nuvama shared this cautious stance, revising its target valuation to Rs 1,770. Notwithstanding these reservations, these brokerage firms have upheld their “Buy” endorsements for the stock, while recognizing the bank’s efficient execution and history of attaining granular expansion.
@HDFC_Bank announces its Financial Results for the second quarter of FY2023-24
— HDFC Bank News (@HDFCBankNews) October 16, 2023
The bank posted a standalone net revenue of ₹ 38,093 CR in Q2 FY2023-24, compared to ₹ 28,617 CR in Q2 FY2022-23, registering an increase of 33.1%
Click to know more:https://t.co/MpNRD6PPk4… pic.twitter.com/rDHRdVwg45
Motilal Oswal Securities is of the opinion that HDFC Bank has laid the groundwork for enduring business development and has commended its efforts in capacity augmentation. They have retained their stock valuation target at Rs 1,950. Jefferies, Morgan Stanley, Citi, and InCred Equities have also conveyed bullish sentiments, with their stock valuation targets spanning from Rs 2,000 to Rs 2,110.
Conversely, HSBC and CLSA have adopted a more conservative stance, lowering their stock valuation targets, citing concerns regarding the transient impact on financial ratios due to the merger with HDFC. HSBC has set its target valuation at Rs 1,850, while CLSA has positioned its target at Rs 2025. Nevertheless, both brokerage houses continue to exhibit faith in the bank’s long-term potential.
Phillip Capital has observed that the NIM contraction surpassed expectations, primarily attributable to surplus liquidity and accounting adjustments pertaining to HDFC’s financials. The bank is anticipated to concentrate on bolstering its capacity in the immediate future, with elevated operational expenditures likely to persist.
In summary, HDFC Bank’s extraordinary results for the second quarter and its amalgamation with HDFC have elicited a spectrum of optimism and circumspection among analysts. While near-term uncertainties persist, the bank’s robust fundamentals and potential for expansion continue to seize the central spotlight for market participants. The financial sector eagerly anticipates further milestones in HDFC Bank’s journey toward enduring success.
