HDFC Bank, one of India’s largest private lenders, saw its share price reach a 52-week high of Rs 1,715.85 in initial trade, but lost all of its gains and was trading at Rs 1,669, down Rs 24.30, or 1.44%, on the BSE. Despite this, the bank reported a significant increase in its consolidated net profit of 21% at Rs 12,594.5 crore year over year.
In the fourth quarter results, HDFC Bank reported a consolidated net income increase of 20.3 percent year on year to Rs 34,552.8 crore, compared to Rs 28,733.9 crore in the previous quarter. In an exchange filing on April 15, HDFC Bank announced that its net interest income (NII) increased by 23.7 percent to Rs 23,351 crore from Rs 18,872 crore for the quarter ended March 31, 2023.
The bank had a solid quarter with steady NII development and stable margins, while its pre-arrangement working benefit (PPoP) development was modest. Credit growth was driven by supported energy in the retail segment and robust development in business and provincial banking. Despite a moderated restructured book to 31bp of loans, asset quality ratios remained robust, and the bank has a solid PCR and a contingent provisioning cushion to help maintain asset quality.
According to the brokerage firm, HDFC Bank’s earnings estimate is maintained and projects a PAT CAGR of less than 19 percent from FY23 to FY25, with a RoA/RoE ratio of 2.0 percent and 17.7 percent in FY25. With a target price of Rs 1,950 (based on 3.0x Sep’24E ABV), the brokerage has reiterated its “buy” rating, and potential improvements in margins and progress on the merger are considered the most important monitorables.
The management of HDFC Bank anticipates a higher cost-to-income (CI) ratio and stable NIMs in FY24, and the consolidation is expected to be completed by July 2023, as indicated by the board. According to the report, the bank may benefit from the peak of the interest rate cycle and a decrease in incremental system LDR.
Overall, despite the fluctuations in its share price, HDFC Bank’s strong financial results for the quarter ending March 31, 2023, indicate continued growth for the private lender, and investors and industry experts are keeping a close watch on the bank’s future developments.
