HDFC Bank business growth intact despite sanctions; brokerage houses see a 27% increase in the share price

HDFC Bank said its advances increased 13.9% year-on-year in the previous quarter, while deposits increased 16.3% in the same period. (Photo: REUTERS)

HDFC BankThe stock price traded flat with a positive bias on Tuesday morning, a day after the largest private sector lender informed the exchanges of its quarterly performance. HDFC Bank said its advances increased 13.9% year-on-year in the previous quarter, while deposits increased 16.3% in the same period. The bank released strong quarterly figures despite sanctions imposed by the Reserve Bank of India (RBI), for repeated computer failures. Major national brokerage firms see the Quarterly Business Update as a positive for HDFC Bank. The private sector bank is currently trading at Rs 1,448 each.

Advances at the end of March 2021 stood at Rs 11.32 lakh crore for HDFC Bank, compared to Rs 9.94 lakh crore during the period last year. Retail lending grew 7.5% year-on-year, while domestic wholesale lending increased 21%.

Encouraging business update

Motilal Oswal analysts wrote that the developments are “encouraging given the RBI’s restrictions on credit card trading.” “HDFC Bank continues to post healthy growth in advances, driven by a slight increase in personal loans; this is likely to further support fee income, ”they added. The bank’s CASA deposits grew 27% year-over-year. “We expect HDFC Bank to maintain a positive margin trajectory, aided by an improving CASA mix and healthy loan growth trends,” the note said. Motilal Oswal has a “Buy” rating on the script with a target price of Rs 1,800 per share.

On the other hand, Emkay Global believes that HDFC Bank’s business momentum has moderated in the previous quarter. “On the asset quality front, we think the agri and CV portfolios might show some stress, but overall NPA ratios should remain low,” they said. Emkay Global also has a “Buy” rating on the stock with a target of Rs 1,850 per share, up 27% from current levels.

Card Trade Restrictions – A Surplus

The RBI has placed restrictions on HDFC Bank, preventing it from acquiring new credit card business. The restrictions come after HDFC Bank failed to address the issue of repeated technology failures customers were facing. Emkay Global believes this could remain a surplus for the title. “In our view, the RBI’s restriction on the bank’s credit card business will likely remain a surplus on the stock, as any relief in the form of an early lifting of the suspension could be delayed as a result of the recent technology failures, ”they added.

(The stock recommendations in this story are by the respective research and brokerage firms. Financial Express Online assumes no responsibility for their investment advice. Please consult your investment advisor before investing.)

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