HDFC Bank shares: Should you buy or hold as Q2 results meet estimates?

Net interest income (NII) grew 19%, while net interest margin (NIM) stood at 4.3%. Asset quality improved, with the gross non-performing assets ratio at 1.23% in the September quarter, compared with 1.28% in the previous quarter. The bank’s loan book grew 23.4% year-on-year (YoY).

“HDFC Bank reported a steady quarter with recovery in Core PPoP growth and margins though treasury loss dragged PPoP. We estimate ~19% PAT CAGR over FY22-24, with an RoA/RoE of 2.0%/17.2%, respectively, in FY24. We expect the stock to perform gradually as revenue and margin revive further while the merger-related overhang ebbs as HDFCB looks to complete the merger by 1Q/2QFY24E,” said brokerage Motilal Oswal while maintaining its Buy rating on HDFC Bank shares with a target price of ₹1,800 apiece.

“HDFC Bank reported strong operating performance in 2QFY23. The slippages decreased 55% sequentially, which resulted in slight improvement in GNPA ratio. Furthermore, the contingent stands adequate. We believe, superior underwriting practices, higher liquidity, adequate coverage and strong capital position makes the bank well placed and we recommend Buy with revised price target of ₹1,831,” said LKP Securities.

The private sector lender said it might complete its planned merger with Housing Development Finance Corp Ltd (HDFC) ahead of time by the first quarter of FY24 instead of the original target of the third quarter.

“HDFC Bank remains our top pick with its strong execution and liability franchise – more valuable when rates rise. The stock has underperformed NIFTY by 7% YTD due to merger concerns and NIM pressure. With improving profitability and a strong retail footprint, the stock would re-rate. With impressive retail deposit growth and NII beat, we reiterate ‘BUY’ on the bank stock and out new TP is ₹1,825,” said brokerage Edelweiss.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.