HDFC Bank reported a sequential decline in profitability and weakening of assets quality in the quarter ended June ’22. PAT declined sequentially by 8.5% to Rs92 bn in Q1FY23, largely due to weak other income as the bank booked MTM losses of Rs13 bn on the investments portfolio Q1FY23. Meanwhile, brokerage houses have largely maintained a bullish stance on the private lender. The most aggressive target came from Choice Broking which sees an upside of over 40% in the counter.
As per Axis Securities, HDFC Bank’s (HDFCB) Q1FY23 earnings performance was broadly in-line with its estimates. It maintained a buy with a target price of Rs 1,840, , implying an upside of 35% on Friday’s closing price.
“Loan growth was robust at 23/2% YoY/QoQ driven by healthy growth in the Commercial & Rural Banking (excl-Agri) (+30% YoY, +4% QoQ) and a pick-up in the retail portfolio (+22% YoY, +5% QoQ), while corporate loans growth remained flat QoQ,” it said.
It is of the view that loan growth was encouraging and is likely to sustain a favourable change in the portfolio mix towards retail and CRB segment will aid NIMs. “Opex is likely to remain elevated with continuous investments in branch and business expansion, scaling up the retail franchise and towards technology. However, with asset quality headwinds well managed and largely behind, we do not expect any meaningful deterioration in the asset quality and lending to high-quality borrowers will also help HDFB keep its credit costs under control,” it added.
Choice Broking expects positive impact of increasing growth momentum in high yielding retail portfolio and repricing of assets to start fully reflecting on margin in the coming quarters. “While slippages increased during the quarter, low stress book, improving credit scenario (check bounce rate declined across all retail segments) and high standard provisioning provides comfort on the assets quality front,” it said.
It, however, feels that volatility in trading portfolio due to rising yield may continue to weigh on other income in the coming quarters.
It feels the counter is in the position to churn out a potential upside of 43.3% from current levels. The upside has been calculated on Friday’s closing price. It gave an outperform rating with target price of Rs 1955 for the banking scrip.
Meanwhile, IDBI Capital remained structurally positive on HDFCB given its superior credit underwriting, structurally better NIM and the ability to maintain higher RoA among its peers. However, it said it is important to watch for merger impact on the HDFC bank’s regulatory requirements if RBI does not allow dispensation.
It maintained a buy with a target price of Rs 1860, an upside of 36% on its previous closing price of Rs 1364.
Global brokerages though feels results were on expected lines. It prefers SBI and ICICI Bank to HDFC Bank
On Monday, shares of HDFC Bank declined one and half per cent to Rs 1342 per share on the BSE around 1.15 pm