Global brokerage firm HSBC has issued a ‘buy’ rating on HDFC Bank, setting a target price of Rs 1,750 per share, indicating a potential upside of 22 percent from current levels. Analysts at HSBC are optimistic about the stock’s prospects, forecasting returns of 15-29 percent compounded annually over FY24-27.
Despite a challenging year with HDFC Bank’s stock declining by over 16 percent while the benchmark Sensex dropped by only 2 percent, HSBC remains bullish. The private sector lender’s shares hit a 52-week low of Rs 1,363 on February 14, 2024. According to HSBC analysts, the primary factor behind the stock’s recent performance is the bank’s high expectations for loan growth, rather than deposits. They believe that a reduction in loan growth could actually benefit the stock, positively impacting net interest margin (NIM) or return on asset (RoA) outlook.
Similarly, analysts at Citi previously expressed confidence in HDFC Bank, assigning a target price of Rs 2,050. They highlighted the bank’s robust and sustainable franchise, which is expected to drive profitable growth in the future. Citi noted HDFC Bank’s strategy to maintain a healthy incremental liquidity deposit ratio (LDR) and liquidity coverage ratio (LCR), and its plans to adjust lending rates to offset increased funding costs. The bank aims to uphold its net interest margin (NIM) and return on assets (RoA) within the target range.
Morgan Stanley also shares a positive outlook on HDFC Bank, giving it an ‘overweight’ rating with a target price of Rs 2,110 per share. The bullish sentiment was reinforced by the bank’s management reporting stable and healthy double-digit year-on-year (YoY) growth in its home loan business post-merger until December 31, 2023.
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