Nuvama Maintains Buy Rating on HDFC Bank - Check Details

Nuvama Institutional Equities has reaffirmed its Buy rating on HDFC Bank, setting a target price of Rs 1,950. The brokerage firm believes the bank has delivered impressive results despite a tough macroeconomic environment. The positive developments reflect improvements in asset quality, significant growth in deposit market share, better loan-to-deposit ratios, and core margins that met expectations.

Nuvama on HDFC Bank: Strong Asset Quality and Lower Slippages

Nuvama highlighted the bank's strong performance, especially its ability to handle the first quarter of the PSL (priority sector lending) for e-HDFC without major concerns. The bank's slippage ratio remained stable when excluding the agriculture sector. However, when agriculture was included, the slippage showed a 13% quarter-over-quarter increase. Despite this, HDFC Bank's overall slippage ratio of 1.4% remains the lowest compared to other private lenders.

The bank's management noted that deposits grew faster than loans, which helped it make progress in normalising its credit-deposit ratio. They also confirmed that the bank has sufficient liquidity and capital to support loan growth once the macroeconomic conditions improve.

HDFC Bank’s Q3 Performance

HDFC Bank's share price rose 1.3%, reaching an intra-day high of Rs 1,687 after the company announced its Q3 FY25 results. The bank reported a 2.2% year-on-year increase in standalone net profit, reaching Rs 16,736 crore compared to Rs 16,372.54 crore in Q3 FY24.

The bank’s net interest income saw a 7.7% growth year-on-year, rising to Rs 30,650 crore due to a stable net interest margin of 3.43%. Total income also grew by 7%, reaching Rs 87,460 crore in Q3 FY25, up from Rs 81,720 crore in the same period last year.

In addition to this, HDFC Bank’s net interest income for Q3 reached Rs 11,450 crore, reflecting a 2.8% year-on-year increase, driven by strong growth in core fees and commissions.

HDFC Bank's Q2 Performance

For Q2 FY25, HDFC Bank posted a 5.3% increase in standalone net profit, which came in at Rs 16,821 crore, compared to Rs 15,976 crore in Q2 FY24. Net interest income for Q2 grew by 10% to Rs 30,110 crore, compared to Rs 27,390 crore in Q2 FY24. The bank’s total income rose to Rs 85,500 crore, compared to Rs 78,406 crore in the same quarter a year ago.

HDFC Bank Vs. Nifty 50

HDFC Bank's stock has risen more than 1% over the last five trading sessions. However, the stock has fallen more than 7% over the past month but gained 3.3% over the last six months. In the past year, the stock has returned 17%.

In comparison, the benchmark Nifty 50 index has fallen by 0.8% in the past five days and dropped 2.5% over the last month. The index has shed 5.4% over the past six months but has risen 9% in the last year.

Despite the challenges posed by the macroeconomic environment, HDFC Bank has shown strong growth in key areas such as asset quality, deposits, and core margins. With its stable performance and positive outlook for loan growth, the bank continues to be a strong player in India's banking sector. Nuvama's target price of Rs 1,950 indicates continued confidence in the bank's future potential.