Global brokerage firm CLSA has revised its rating on HDFC Bank stock from ‘buy’ to ‘outperform’, with a reduced target price of Rs 1,650 per share down from Rs 2,050. The downgrade follows analysts’ concerns regarding sluggish deposit growth and margin recovery.
Year-to-date, India’s largest private sector lender has seen its stock decline by over 15 percent, in contrast to a marginal 0.9 percent decrease in the Bank Nifty index. Earlier this year, HDFC Bank shares hit a 52-week low of Rs 1,363 per share on February 14, 2024. Analysts at CLSA caution that the bank may face challenges in attracting deposits due to high interest rates and a challenging environment. Additionally, they anticipate a gradual, ‘U-shaped’ recovery in net interest margins (NIM) rather than a rapid ‘V-shaped’ rebound.
“We anticipate that improved yields will offset modest CASA (current and savings account) growth, thus resulting in a gradual NIM recovery. We have lowered our earnings per share (EPS) estimates for FY25/26 by 5 percent,” stated the brokerage firm. Despite this, analysts at HSBC maintain a ‘buy’ rating on HDFC Bank, setting a target price of Rs 1,750 per share. They foresee the potential for the stock to deliver compounded annual growth rate (CAGR) returns ranging between 15-29 percent over FY24-27, emphasizing the bank’s expectations for robust loan growth rather than deposit growth as a key factor.
“Citi analysts also hold a positive outlook on HDFC Bank, with a target price of Rs 2,050 per share. They highlight the bank’s strong and sustainable franchise, poised to drive profitable growth in the future.”
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