India's premier private sector lender and Dalal Street's most valued entity, HDFC Bank, has experienced a 5% year-to-date (YTD) fall in 2023, making it an underperforming banking stock. The bank's shares traded down by nearly half-a-percent at Rs 1,543.20 on Friday, ahead of its Q2 results. A 6% quarter-on-quarter (QoQ) profit after tax (PAT) drop for the quarter ending September 30 is projected. Over the last three months, the scrip has seen a 6% decline.
This performance follows HDFC Bank's entry into the world's top five lenders by market cap post a significant merger. Prashanth Tapse of Mehta Equities foresees potential teething problems as the bank adjusts to changes following the merger.
HDFC Bank, with a market cap of Rs 11.6 lakh crore, or approximately 437.55M USD according to InvestingPro Data, is set to publish its Q2FY24 results on October 15, 2023. This will mark the first quarter post-merger. The announcement time has not yet been confirmed.
According to InvestingPro data, the bank has seen a remarkable revenue growth of 77.37% and a quarterly revenue growth of 111.46%. This growth is reflected in the bank's operational insights, which reveal an 18% year-on-year (YoY) growth in total gross advances and a surge of 30% in commercial & rural banking loans. The bank also demonstrated an 8% increase in corporate and wholesale loans and deposits amounting to Rs.21.73 lakh crore. The bank has shown a CASA growth of 8% YoY with a CASA ratio of 37.6%.
Despite the strong performance of the post-merger entity, margins are expected to contract to 3.7%, influencing the net interest margin (NIM) trajectory. Asset quality is projected to remain flat, with commentary on loan and deposit growth and the timeline for return on assets (ROAs) breach anticipated.
InvestingPro Tips suggests that HDFC Bank's revenue growth has been accelerating and it has consistently increased its earnings per share, making it a prominent player in the bank industry. However, analysts have revised their earnings downwards for the upcoming period, indicating potential challenges. Despite these, the bank has managed to raise its dividend for three consecutive years, providing high returns on book equity to its stockholders.
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