HDFC Bank shares: The biggest private lender in India, HDFC Bank Ltd., had a 6.7% overnight decline in its US-listed shares following the release of its December quarter earnings after the close of Indian markets on Tuesday.

The shares listed on the New York Stock Exchange (NYSE) had not experienced a larger single-day decrease since April 2022, when they had dropped 7.5%. It should be mentioned that HDFC Bank has the biggest weightage among the components on the Nifty 50 index, with over 14%.

HDFC Bank missed expectations in a CNBC-TV18 survey, but its net interest income for the quarter increased by 4% over the same period the previous year. The lender’s net profit exceeded pollsters’ predictions, albeit it increased by 2.5% over the previous year.

From ₹2,903 crore in the September quarter to ₹4,216 crore in the current quarter, provisions increased. In comparison to the September quarter, slippages and recoveries were almost identical at ₹7,000 crore and ₹4,500 crore, respectively.

During the quarter, the lender noted in its earnings call that it has made 100% provisions for Alternative Investment Funds (AIFs) totaling ₹1,220 crore.

In late December, the Reserve Bank of India (RBI) implemented regulations that prohibit banks and non-bank financial companies (NBFCs) from employing the AIF pathway for “evergreening” their loans.

With this action, the RBI hopes to prevent banks and NBFCs from artificially extending or sustaining the life of their loans through the use of the AIF channel.

The management of HDFC Bank further emphasized that 2025 will be a significant year for expansion.

However, brokerage Macquarie has stuck with its “buy” rating on HDFC Bank, citing it as their top sector selection, with a price objective of ₹2,075.

According to the brokerage, any growth in retail and SME loans relative to corporate loans must be the primary driver of any bank margin improvement.

“Improvement in the Loan-To-Deposit (LDR) ratio, by replacing the high-cost borrowings of the erstwhile HDFC Ltd. with deposits will be a long-drawn process in our view,” the note from Macquarie stated.

For the next two years, Macquarie projects that HDFC Bank’s earnings per share (EPS) would increase at a compound annual growth rate (CAGR) of 22%.

Prior to the earnings release, HDFC Bank’s Indian-listed shares ended the day 0.3% higher on Tuesday. Over the previous month and six months, the shares had remained unchanged.

SOURCE: https://www.cnbctv18.com/market/hdfc-bank-share-price-adr-falls-most-since-april-2022-post-q3-results-macquarie-top-pick-18818751.htm