HDFC Bank Ltd, the third most valuable stock in India, experienced a significant decline on Friday, with a decrease of over 4 per cent resulting in a loss of Rs 53,000 crore in market capitalization. This drop was attributed to the lender’s business update for the June quarter, specifically regarding loans and advances as well as deposit growth.
Historically, HDFC Bank tends to see softer loan and deposit growth during the June quarter. Over the past three years, the private lender has typically observed a 1-3 per cent sequential growth in loans and deposits during Q1. However, the figures reported this time around are slightly below the usual levels, as noted by Nomura India in its most recent report.
Following the first quarter update, HDFC Bank’s stock dropped by 4.19 percent, reaching a low of Rs 1,654.25 on the BSE. The bank reported an 11 percent year-on-year growth or flat sequential growth in its gross assets under management (AUM) on a pro-forma basis. Excluding loan sell-downs, gross loans decreased by 0.8 percent sequentially, with a soft year-on-year growth of 10.8 percent.
Deposit growth was modest in the quarter, increasing by 15.3 percent year-on-year on a pro-forma basis and remaining flat quarter-on-quarter. CASA decreased by 5 percent quarter-on-quarter, leading to a sequential decline of 190 basis points in the CASA ratio to 36 percent.
Nomura India stated, “HDFC Bank’s loan and deposit growth (on a pro-forma basis) are below our FY25F estimates of 12 percent year-on-year and 17 percent year-on-year, respectively. While the bank’s balance sheet adjustment is in progress, we anticipate a gradual process. Given the current valuations (2.3x one-year forward BVPS), we do not foresee significant outperformance compared to other private banks. We maintain a Neutral rating,” with a target price of Rs 1,660 on the stock.