Will HDFC Bank Share Price Revive Post Q4 Results?

Investors were keenly awaiting the March 2024 quarterly results of HDFC Bank to review any improvements in key operational parameters like net interest margin (NIMs) of the merged entity.

The Street was rather cautious with regards to HDFC Bank with the stock declining nearly 8% over the past one year in contrast to the benchmark Sensex and Nifty 50 index, which hit lifetime highs in early April 2024.

HDFC Bank has a near 11% weightage in the Nifty 50 index and it is the largest component of this index - and for the broader stock market indices to move up further from here it will certainly depend on the price movement in the HDFC Bank.

Key Takeaways from HDFC Bank Q4

The key highlight for the current quarter was the lender's board recommending a dividend of Rs 19.5 per equity share.

India's largest private sector bank reported stable core NIMs at 3.63% in the March 2024 quarter on interest earning assets and broadly similar to the levels reported in the December 2023 quarter and September 2023 quarter.

The merger of HDFC Bank and HDFC was effective from 1 July 2023 and the results of the fourth quarter of FY24 are not comparable with the year ago period.

Nearest rival ICICI Bank has not yet reported its March 2024 quarter results and its NIMs was 4.43% in the third quarter of FY24.

Meanwhile, HDFC Bank sold its stake in HDFC Credilla Financial Services for a gain, net of tax of Rs 55.3 billion (bn) during the fourth quarter of FY24 and made a floating provision of Rs 109 bn.

The bank has highlighted that the above provision acts like a counter cyclical buffer and makes the balance sheet more resilient.

As a result, HDFC Bank's standalone net profit came in at Rs 165.1 bn for the quarter ended March 2024, broadly flat on a sequential basis, and below the estimates of analysts at leading brokerage houses.

The bank's credit asset quality has been fairly steady - percentage of net NPAs to net advances was 0.33% in the March 2024 quarter vis-a-vis 0.31% in the December 2023 quarter.

Outlook for HDFC Bank

The Indian economy is expected to grow close to 7% in FY25 coupled with a revival in private sector capital expenditure demand for credit is expected to remain strong.

HDFC Bank's gross advances amounted to Rs 25.07 lakh crore at the end of FY24, a growth of 55.4% on a y-o-y basis for the merged entity.

The bank also has over 8,700 branches across the country, and they will play a key role in garnering low-cost deposits and growing its loan portfolio, going forward. And it would help HDFC Bank to bring its NIMs closer to nearest rival ICICI Bank.

Apart from that, HDFC Bank is also set to benefit from the upcoming IPO of HDB Financial services.

HDFC Bank plans to sell some of its shareholding in subsidiary HDB Financial Services over time.

This is because the country's largest private sector bank plans to get into similar lines of business as its subsidiary over the next few years, and there could be overlaps.

HDFC Bank holds a 94.7% stake in HDB Financial Services.

HDB Financial Services' Shareholding Pattern FY23

Shareholder Name	% to Holding	No. of shares
HDFC Bank Limited	94.84	750,596,670
Others	5.16	4,08,02,413

The quarterly results were declared on Saturday last week. A day before announcing results, HDFC Bank ended 2.5% higher at Rs 1,531.

The stock had hit a 52-week high of Rs 1,757 on 3 July 2023.

HDFC Bank has an impressive track record for bringing synergies in entities it has taken over in the past two decades.

HDFC Bank trades at a P/E of nearly 15 times estimated FY25 while ICICI Bank trades at 16 times estimated standalone earnings.

Here's a table comparing HDFC Bank with its peers -

Comparative Analysis

Company	HDFC Bank	Axis Bank	ICICI Bank	IndusInd Bank	Kotak bank
ROE (%)	17.2	8.8	17.7	14.5	14.2
ROCE (%)	15.2	9.3	15.3	13.1	13.9
Latest EPS (Rs)	77.7	43.5	60.4	111.4	87.7
TTM PE (x)	19.7	23.7	17.7	13.3	20.4
TTM Price to book (x)	2.7	2.1	3.1	1.9	2.9
Dividend yield (%)	1.3	0.1	0.8	0.9	0.1
Industry PE	17.7
Industry PB	2.5

Data Source: Ace Equity

For more on HDFC Bank, check out the below video where Co-head of Research at Equitymaster Tanushree Banerjee discusses whether HDFC Bank deserves to trade at historic lows.

Happy Investing!

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