HDFC Bank Faces Share Price Decline Despite Strong Q3 Profit Growth

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HDFC Bank shares experienced a significant drop of nearly 7 per cent during early trade on Wednesday. Despite reporting better-than-expected Q3 profit growth, the bank initially lost over Rs 76,000 crore in market capitalization. However, by 10:23 am, the shares had recovered slightly, trading 5.84 per cent lower at Rs 1,581.10.

Mixed Q3 Performance Highlights

While HDFC Bank surpassed expectations in net interest income (NII) and trading gains, it fell short on fees and credit cost. A notable contingency provision of Rs 1,200 crore towards an Alternate Investment Fund (AIF), despite being 5 per cent higher than the carrying value, impacted the overall results.

Analyst Insights and Concerns

Various brokerages shared insights on HDFC Bank’s performance, expressing both positive and negative sentiments. Nuvama Institutional Equities downgraded the stock due to concerns over LCR, deposit growth, and loan growth. Phillip Capital highlighted liquidity challenges affecting deposit mobilization and suggested a target price of Rs 1,920.

Brokerage Assessments and Target Prices

Motilal Oswal noted that HDFC Bank’s margin remained flat and slightly below expectations. Despite healthy loan growth and improved asset quality ratios, concerns were raised about the sustainability of operating profit growth drivers. The brokerage set a target price of Rs 1,950 on the stock. Nirmal Bang Institutional Equities remained positive on HDFC Bank’s long-term growth potential, maintaining a target price of Rs 1,994 and a buy rating.

Kotak Institutional Equities’ Evaluation

Kotak Institutional Equities maintained a ‘buy’ rating with a target price of Rs 1,860. However, concerns were raised about the sustainability of HDFC Bank’s operating profit growth drivers. The bank’s reported earnings were considered marginally weak, with slower-than-forecasted drivers for net interest margin (NIM) expansion.

Mixed Analyst Sentiments Despite Strong Q3 Profit

While HDFC Bank reported a strong Q3 profit growth, analysts expressed mixed sentiments, citing concerns over various factors. The bank’s share price initially faced a notable decline, recovering slightly later in the trading session. Brokerages provided diverse assessments and target prices, highlighting both positive and cautionary perspectives on HDFC Bank’s future performance.

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