HDFC Bank shares a long-term ‘Buy’, analysts bullish post Q3

“Results were in line with our expectation except for NIM, which remained flat qoq. We see loan repricing benefit to have larger impact on NIMs of other private peers like ICICI Bank & Axis Bank. The near term business strategy would focus on creating enablement for smooth amalgamation, hence growth in deposit and retail loan including SME/Agri would take centre stage,” said analysts at PhillipCapital.

The regulator’s view on key issues (like Stake in HDFC Life; approval to keep HDB Fin as subsidiary; any regulatory dispensation on priority/SLR/CRR etc ) would be important events for the bank in next 3-6 months. The brokerage house remains constructive on the bank with mid to long term perspective and has maintained its Buy rating on HDFC Bank shares with a revised target of ₹1,900.

“The announced merger strategically fits HDFC Bank’s product basket. As the benefits accrue over a period, the intermittent period will see merger-related costs in the form of pressure on margins and cost to income ratio. The return on equity is expected to moderate in near terms owing to low leverage of the parent, however we expect RoA to sustain at 2% level,” it added.

As per Emkay, Bank continues to clock strong growth in the retail/SME segment which we believe should support its margins amid rising cost pressure. The merger process is on the fast track, with shareholder approval now in place; the bank is hopeful of it being completed earlier than guided.

“That said, clarity on the stake of HDFC Life and other subsidiaries as well as on the merger structure by the RBI remains elusive. Notwithstanding the merger-related regulatory overhang, we believe HDFCB offers the best play on India’s consumption story and is also a good defensive bet in current choppy waters,” the note stated while retaining its long-term BUY, with a revised target price of ₹1,925 per share.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.