Why is HDFC Bank stock falling today? Nomura shares target price

New Delhi , 5 July 2024 :- HDFC Bank Ltd, India’s third most-valued stock, experienced a significant decline, dropping over 4% on Friday. This resulted in a loss of Rs 53,000 crore in market capitalisation following the lender’s business update for the June quarter concerning loans and advances and deposit growth.

Historically, the June quarter has shown seasonally soft growth for HDFC Bank in terms of loans and deposits, with a typical sequential Q1 growth rate of 1-3% over the past three years. However, the figures reported this time were slightly lower than expected, according to a note from Nomura India. The HDFC Bank stock dropped 4.19%, reaching a low of Rs 1,654.25 on the BSE.

For the June quarter, HDFC Bank reported an 11% year-on-year (YoY) increase in gross assets under management (AUM) on a pro-forma basis, but this was flat sequentially. After accounting for loan sell-downs, gross loans actually decreased by 0.8% sequentially, with a YoY growth rate of 10.8%, which was considered soft. Deposit growth was similarly weak, with a 15.3% YoY increase on a pro-forma basis and no growth quarter-on-quarter (QoQ). The current account savings account (CASA) ratio declined by 5% QoQ, reducing the CASA ratio by 190 basis points (bps) to 36%.

Nomura India noted that HDFC Bank’s loan and deposit growth rates (on a pro-forma basis) are tracking below their FY25 forecast estimates of 12% YoY and 17% YoY, respectively. They believe that while the bank’s balance sheet correction is in progress, the process will be gradual. At the current valuation of 2.3 times one-year forward book value per share (BVPS), Nomura does not foresee significant outperformance compared to other private banks. They have maintained a neutral stance on the stock with a target price of Rs 1,660.

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