Global brokerage firm CLSA has downgraded HDFC Bank's stock rating from 'buy' to 'outperform' and slashed the target price from ₹2,050 per share to ₹1,650. CLSA's downgrade emphasises the challenges faced by HDFC Bank in deposit accretion, posing potential hurdles to loan growth.
HDFC Bank, India's largest private sector lender, has experienced a decline in its stock value this year, plummeting over 15%. This contrast is evident compared to the mere 0.9% decline in the Bank Nifty index over the same period.
Analysts at
CLSA highlighted the twin challenges on the deposit front, citing a high ask rate and a challenging overall economic environment.
The brokerage firm anticipated a manifestation of these challenges in the form of lower loan growth for the bank.
Despite efforts to improve yields, HDFC Bank's margin recovery is expected to be gradual, with CLSA projecting a more 'U-shaped' trajectory than a swift 'V-shaped' rebound.
The offset between improving yields and muted CASA (Current Account Savings Account) accretion is anticipated to influence the gradual nature of the net interest margin (NIM) recovery.
"HDFC Bank's expectations of high loan growth, and not deposits, are at the core of the debacle. Lowering the loan growth may be beneficial for the stock. It would be positive for its net interest margin (NIM) or return on asset (ROA) outlook," the brokerage firm said.
CLSA further trimmed the earnings per share (EPS) estimates for FY25 and FY26 by 5%.
At the time of writing this report, HDFC Bank shares were trading 0.89% lower at ₹1,433.50 apiece on the BSE.
