HDFC Bank Shares Fall Over 4% on Sequential Decline in Loans Disbursed

HDFC Bank Shares Drop Over 4% After Disappointing Loan and Deposit Growth

In a surprising turn of events, shares of India’s top private lender HDFC Bank plummeted over 4% on Friday, making them the top losers on the Nifty 50 index. This sharp decline comes just a day after the bank reported a sequential decrease in loans disbursed and stagnant deposit growth in the first quarter.

The Mumbai-based lender, which merged with HDFC last July, faced challenges as it added a significant amount of mortgage loans to its portfolio but saw minimal growth in deposits. This imbalance put pressure on the bank to either accelerate deposit growth or slow down loan expansion.

As of 5:46 GMT, HDFC Bank shares were on track for their largest one-day drop since June 4, coinciding with India’s election results. The stock had recently reached a record high on expectations of a larger weightage in a key MSCI index. However, in the April-June quarter, gross advances decreased by 0.8% sequentially to 24.87 trillion rupees ($297.89 billion).

The decline in loan growth was primarily driven by a 5% quarterly decrease in corporate loans, according to Macquarie analyst Suresh Ganapathy. He described the April-June period as a “seasonally weak quarter” for the bank.

HDFC Bank’s deposits remained nearly unchanged at 23.79 trillion rupees in the June quarter, a figure that Jefferies deemed “slightly disappointing.” Additionally, low-cost current and savings account deposits saw a 5% sequential decline to 8.64 trillion rupees during the same period.

The bank’s loan-to-deposit ratio (LDR), a crucial metric for assessing a lender’s ability to fund loan growth, remained steady at 105% compared to the previous quarter.

These figures are provisional, and the bank is scheduled to announce its financial results on June 20. Macquarie’s Ganapathy anticipates that HDFC Bank’s net interest margins, a key indicator of profitability, will “remain broadly unaffected” in the April-June period.

Despite the recent setback, Macquarie maintains an Outperform rating on the stock with a target price of 1,825 rupees per share.

($1 = 83.4810 Indian rupees)