Motilal Oswal Securities, which has a target of Rs 1,950 on the stock, said it would watch out for business growth and earnings trajectory for HDFC Bank. 
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Motilal Oswal Securities, which has a target of Rs 1,950 on the stock, said it would watch out for business growth and earnings trajectory for HDFC Bank. Down 6 per cent year-to-date, HDFC Bank Ltd, the most valued bank on Dalal Street, has been the worst-performing banking stock in 2023 so far. While largecap bank stocks have largely underperformed midcap and smallcap peers, recent updates by HDFC Bank on the merged entity's (HDFC Bank-HDFC) net worth, net interest margin (NIM) and return on assets weighed on the seventh largest lender in the world.
Going ahead, HDFC Bank's Q2 NIM would be the key monitorable, Nuvama Institutional Equities said in a note. In its Q2 update, the private lender reported a strong loan and deposit growth. But the bank is likely to report a sequential drop in profit.
"Q2 will be the first quarter where HDFC Bank will disclose its merged financials. We will watch out for trends in merged RoA, with pressures arising from liquidity reserve requirements (25-30 bps NIM impact called out by management) and higher opex ratios. HDFC Bank should also see a separate (albeit transient) 10 bps NIM impact due to I-CRR requirement in Q2, in our view. We had recently downgraded HDFC Bank to Neutral, citing medium-term pressures on its RoA and loan growth profile," said Nomura India while suggesting a target price of Rs 1,800.
CLSA maintained is 'Buy' on the stock with a target of Rs 2,025. Morgan Stanley sees the stock at Rs 2,110. JPMorgan, which has an overweight and a target of Rs 1,900 on the stock, said any weakness post Q2 should be used to accumulate the scrip. Jefferies finds the stock worth Rs 2,030 while Bernstein sees it at Rs 2,100.
The scrip was trading at Rs 1,537.25 on Wednesday, down 0.42 per cent. Peers ICICI Bank (up 4 per cent), Axis Bank (up 6 per cent), Kotak Mahindra Bank (down 4 per cent) and State Bank of India (down 3 per cent) fared better than HDFC Bank this year so far.
"Merged loans grew 5 per cent QoQ/ 15 per cent YoY. Incremental deposits during Q2FY24 at Rs 1.1 lakh crore crossed the Rs 1 lakh crore mark and grew significantly over Rs 29,000 crore in Q1FY24. Due to margin pressure already communicated by the management, NII growth is anticipated to be weak at 1 per cent QoQ. PAT is estimated to decline 6 per cent QoQ," Nuvama said.
This brokerage sees Q2 profit for the merged entity at Rs 15,180 crore, up 1 per cent YoY. NII is seen at Rs 29,070 crore, up 13 per cent YoY. NIM is seen at 3.5 per cent. Nuvama expects Q2 slippages at 3.5 per cent, credit cost to total loans at 0.49 per cent, as it maintained its buy rating on the stock with a target of Rs 1,960.
Motilal Oswal Securities, which has a target of Rs 1,950 on the stock, said it would watch out for business growth and earnings trajectory for HDFC Bank. It sees Gross NPA ratio at 1.4 per cent against 1.2 per cent in June quarter.
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