HDFC Bank shares tank 6% post Q3 results, lose Rs 77,000 crore m-cap. Here's why

Shares of HDFC Bank Ltd cracked 6 per cent in Wednesday's trade, erasing over Rs 76,000 crore in market capitalisation following a mixed set of December quarter results. HDFC Bank reported a beat on net interest income (NII) and trading gains but a miss on fees and credit cost. The bank made a big contingency provision towards AIF of Rs 1,200 crore, even as the value was 5 per cent higher than the carrying value, Nuvama Institutional Equities said while citing some offset due to a big tax reversal.

"We are cutting earnings by 5–6 per cent for FY25E–FY26E. While the cut in core earnings is higher at 8 per cent due to a 4 per cent cut in loan growth, it is partially offset by an upward revision of non-core items. The bank has exhausted its LCR, will need to lower its LDR and is running slower than guidance on deposit growth. In all, we are lowering the target to Rs 1,730 from Rs 1,770," Nuvama said while downgrading the stock to ‘HOLD’.

The third most valued stock plunged 6.48 per cent to hit a low of Rs 1570 on BSE. The market capitalisation of HDFC Bank dropped to sub-Rs 12 lakh crore level to Rs 11,98,094.09 crore against Tuesday's Rs 12,74,740.22 crore, down nearly Rs 77,000 crore.

Also read: HDFC Bank Q3 results: Profit jumps 34% to Rs 16,373 crore, meets Street expectations; key takeaways

Phillip Capital said the results were in line on back of drawdown of excess liquidity in the balance sheet but said tight liquidity condition is creating challenge for the bank to mobilise deposit.

"The ask rate for deposit outstrip the current run rate, which may transpire into moderation in credit growth.

Decline in liquidity coverage and rising LDR, limits the scope for balance sheet manoeuvrability to defend margin," it said while suggesting a target of Rs 1,920 on the stock.

Motilal Oswal said the HDFC Bank margin stood largely flat, which was slightly below its expectations, even as the bank deployed excess liquidity and significantly drew down the LCR ratio.

"Loan growth was healthy driven by growth in retail and continued traction in Commercial and Rural banking. Asset quality ratios improved while PCR also inched up to 75 per cent. The bank has continued to maintain 0.6 per cent buffer of floating + contingent provisions, which provides additional comfort. Management suggested that NIMs will improve gradually over the coming years, which along with an improvement in operating leverage will enable the bank to deliver healthy return ratios," it said while suggesting a target of Rs 1,950 on the stock.

InCred Equities said elevated cost of deposits and pressure on margins would be common issue for all banks in the coming quarters and that HDFC Bank is better placed due to its improved penetration providing portfolio granularity and command over loan pricing.

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