HDFC Bank ADR down over 8% after Q3FY24 results as Nifty 50 posts biggest single-day fall in 19 months

A day after announcing its October-December quarter results for fiscal 2023-24 (Q3FY24), the share price of HDFC Bank witnessed a sharp decline in its American Depository Receipts on the New York Stock Exchange (NYSE) on Wednesday, January 17. HDFC Bank ADRs crashed 8.4 per cent to $56 as of 9:30 pm (India) on Wednesday.

American Depositary Receipt (ADR) serves as a tool for foreign companies to trade on US stock markets, just like regular shares of US companies. An American Depository Receipt is similar to a special certificate issued by a US bank.

The decline in ADRs comes after domestic equity benchmarks Sensex and Nifty 50, witnessed their biggest single-day percentage loss since June 2022 today dragged by across the board selling amid weak global cues. The benchmark Sensex tanked 1,628.01 points, or 2.23 per cent, to end at 71,500.76, while the Nifty 50 settled 460.35 points, or 2.09 per cent, lower at 21,571.95.

Also Read: HDFC Bank share price cracks over 8% after Q3 results, erases over a lakh crore in m-cap; What should investors do?

The freefall was predominantly triggered by a substantial decline in HDFC Bank’s share price, after the lender reported its December quarter results. HDFC Bank, the heaviest-weighted stock on the indexes, tumbled 8.44 per cent in its biggest one-day slide since May 2020, on worries over its stagnant margins.

The market capitalisation of the stock dropped by nearly over a lakh crore in a single day to ₹11.7 lakh crore. HDFC Bank shares pulled the bank index and overall financial services index down a little over four per cent.

Nifty Bank concluded the day with a steep decline of over 4 per cent, as every constituent found itself in negative territory. This was the biggest single-day percentage fall of the Nifty Bank index since March 7, 2022.

HDFC Bank Q3 Results

The private lender reported a growth of 33 per cent in net profit at ₹16,372 crore, compared to ₹12, 259 crore in the year-ago period. HDFC Bank’s net interest income came in at ₹28,470 crore in the December quarter, reporting a growth of 24 per cent year-on-year.

HDFC Bank’s net interest income (NII) came in at ₹28,470 crore in the December quarter, which increased by 24 per cent, compared to ₹22,990 crore reported in the corresponding quarter of the previous fiscal. This is HDFC Bank’s second earnings report since its merger with parent Housing Development Finance Corp (HDFC) in July.

Also Read: HDFC Bank Q3 Results Highlights: Net profit rises 33% to ₹16,372 crore, NII up 24% YoY

HDFC Bank’s gross non-performing assets (NPAs) were reported at 1.26 per cent in Q3 of FY24, up from 1.23 per cent last fiscal year. The net NPAs in the December quarter of FY24 stood at 0.31 per cent, compared to 0.33 per cent last year.

A majority of brokerage firms retained their positive views on HDFC Bank after its December quarter earnings. However, some of them have trimmed their estimates for the short-to-medium term and analysts expressed concerns over higher call deposit receipts (CDRs).

Here’s what top brokerage firms and analysts said about HDFC Bank stock after the Q3 results:

Religare Broking:

Religare Broking has reiterated its buy rating on HDFC Bank stock with a revised target price of ₹2,010 and sees a potential upside of 19.7 per cent.

‘’We remain positive on HDFC Bank as the bank is seeing healthy credit demand. The management expects margin to improve in the coming quarters as the deposits pace picks up and interest rates moderate. The bank continues to maintain healthy asset quality. The bank is also yet to see the synergies from merger which will enable in higher cross selling of products to existing customers,” said Religare Broking.

The asset quality is expected to decline going forward as the bank is seeing decline in slippages on both retail and corporate segment, according to the brokerage. The bank is yet to see the effect of its branch expansion drive which is expected to accumulate deposits as a faster pace as compared to its peers. Due to lag in deposits, its credit to deposits ratio stood at 111.5 per cent as against 87.7 per cent in the year-ago period.

LKP Securities:

‘’The third quarter performance seems at par, however, the higher CDR (110 per cent) and lower LCR (110 per cent in 3Q against 126 per cent in 2Q) are cause of concerns. The lower LCR and slower deposit growth may limit NIMs expansion going forward. The reported NIMs of 3.6 per cent (for interest earning assets) came below expectations,” said Ajit Kabi, Research Analyst at LKP Securities

‘’The lower LCR, CDR bottleneck and slower deposit growth may squeeze NiMs going forward. We believe, the street is concerned about the above factors. Nevertheless, we may witness recovery in coming period. We have 12 month price target of 1,700 (11 per cent upside potential),” added Kabi.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.