HDFC Bank share price gains after Q1 results. Should you buy, sell or hold the stock?

HDFC Bank share price gained over a percent higher in early trade on Monday after the country’s largest private sector bank reported its earnings for the fiscal first quarter ended June 2024. Gains in HDFC Bank shares comes in an otherwise weak market as the benchmark Nifty 50 dropped half a percent, while the Bank Nifty was down 0.6%

HDFC Bank reported a net profit of ₹16,175 crore in Q1FY25, registering a decline of 2% from ₹16,512 crore in the previous quarter. The bank’s Net Interest Income (NII) rose 2.6% to ₹29,837 crore in the June quarter as compared with 29,078 crore in the March quarter, while net interest margin (NIM) improved 3 bps QoQ to 3.47%.

Asset quality depreciated sequentially in the quarter ended June 2024 as the gross non-performing asset (NPA) rose 6% sequentially to ₹33,026 crore and the net NPA jumped 17.5% QoQ to ₹9,508.4 crore. Gross NPA ratio increased 9 bps QoQ to 1.33% and net NPA ratio rose 6 bps QoQ to 0.39%.

Here’s what brokerages have to say on HDFC Bank Q1 results and HDFC Bank stock:

Motilal Oswal

HDFC Bank posted an in-line performance, characterized by slight margin improvement and controlled provisions. Business growth was tepid in 1Q, with loan growth declining 1% QoQ due to wholesale. We model some moderation in loan growth in FY25 and FY26E. However, the gradual retirement of high-cost borrowings, along with an improvement in operating leverage, will provide some support to the return ratios over the coming years, Motilal Oswal said.

The brokerage firm estimates HDFC Bank to deliver 16% CAGR in deposits and a slower 10.1% CAGR in loans over FY24-26. It estimates the lender to deliver an FY26 RoA and RoE of 1.9% and 15.1%.

Motilal Oswal reiterated its ‘Buy’ rating on HDFC Bank shares with a target price of ₹1,850 apiece.

Antique Stock Broking

According to Antique Stock Broking, despite such a humongous merger, important ratios of profitability, asset quality such as NIM, cost to income, GNPA, and RoA have stayed range bound with an improving trend in the last couple of quarters which signifies the resilient nature of the bank. Hence, the brokerage firm continues to remain positive on the bank and expects the bank to clock a RoA of 1.8% – 1.9% and RoE of 15% – 16% over FY25-27E.

HDFC Bank has to demonstrate that it can grow its margins sustainably in the backdrop of slow loan growth as compared to deposits, Antique Broking said. Overall, it reduced FY25 and FY26 earnings estimates by 3% while maintaining FY27 estimates.

The brokerage firm maintained a ‘Buy’ rating on HDFC Bank shares with an unchanged target price of ₹1,900 per share.

Emkay Global

HDFC Bank disappointed on deposit growth in Q1FY25, after a stellar uptick in Q4FY24 due to run-down in its CA pool as well as a conscious run-down in bulk deposits, said Emkay Global.

The brokerage cut its credit growth estimates over FY25-27 to 10-12% from 12-14%, partly offset by contained credit cost, leading to a 2-6% earnings cut. However, it retained a ‘Buy’ call on HDFC Bank stock with a target price of ₹2,000 per share.

It believes incremental deposit mobilization and IPO of HDB Financial Services will be key near-term monitorables.

At 9:20 am, HDFC Bank shares were trading 0.68% higher at ₹1,618.10 apiece on the BSE.

Catch Stock Market Live Updates here

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