HDFC Bank, India’s largest private sector bank, experienced an 8% decline in share prices just a day after unveiling its Q3 results. As of January 17, the share prices recorded a significant drop, falling to ₹1537.50 apiece, marking a 8.43 percent decrease from the previous closing rate of ₹1,678.95.
The muted market response extended beyond India, impacting HDFC Bank’s US-listed shares on the New York Stock Exchange (NYSE), where they fell by 6.71% following the Q3 earnings report.
Q3 Results Overview:
HDFC Bank reported a standalone net profit of ₹163.73 billion ($1.97 billion) for the quarter ending December, surpassing analysts’ expectations. However, the net interest margin (NIM) remained stagnant at 3.4%, disappointing compared to the previous quarter.
While the net interest income saw a modest rise to ₹28,471 crore, the gross non-performing assets (NPAs) marginally increased to 1.26% in Q3 of FY24.
Analyst Insights:
Kotak Institutional Equities expressed concerns, stating that the growth drivers for operating profit seem less sustainable, with higher provisions reported by the bank. The underlying deposit growth environment has deteriorated, and the expected expansion in net interest margin drivers appears to be slower than anticipated.
Challenges and CFO Insights:
HDFC Bank’s Chief Financial Officer, Srinivasan Vaidyanathan, highlighted challenges in the liquidity system, turning negative for the first time since 1Q 2020. He emphasized the need for deposits to support operational loans in light of constraints imposed by the central bank.
The market’s reaction to HDFC Bank’s Q3 results reflects concerns about stagnant margins, slower-than-expected growth drivers, and challenges in the deposit environment. Investors and analysts are closely monitoring the situation, seeking clarity on the bank’s strategies to navigate these challenges and regain momentum.