HDFC Bank shares jump 2.4% on strong quarterly business update; should you buy or sell?

India’s largest private lender HDFC Bank’s shares gained 2.4% on opening  bell on Tuesday morning to trade at Rs 1,141 per share, as investors reacted to the lender’s strong quarterly advances and deposits growth. HDFC Bank, informed the bourses that during the July-September quarter its advances aggregated to approximately Rs 10.37 lakh crore compared to Rs 8.97 lakh crore in the same period last year, translating to a 16% growth on-year basis. Shares of the private lender have surged 47% from their March lows. HDFC Bank, analysts say, is well placed with healthy assets among peers.

HDFC Bank also said that its deposits grew at 20% from the previous year. In the second quarter of this fiscal year, deposits aggregated to approximately Rs 12.29 lakh crore which was at Rs 10.16 lakh crore in the same period last year. When compared to the previous year, the bank’s deposits grew 3%. Further the current account and savings account ratio during the previous quarter stood at 42%, the same was at 39.3% last year. 

Analysts believe HDFC Bank’s strong performance even during the pandemic warrants further growth in market share. “Management commentary of reaching closer to pre-Covid levels had indicated that growth is reaching 15-20 % range. Hence, these are largely in line with estimates,” said ICICI Securities. Market participants also believe that HDFC Bank success in doing away with the key overhang of succession will also add to the momentum further. Sashidhar Jagdishan, a long term employee of the bank, will take over as the new MD and CEO of HDFC Bank later this month. 

HDFC Bank shares are currently trading at 2.6x FY22E P/ABV. “Credit growth was healthy, largely in line with our expectation. Overall growth seems to be better than the industry, primarily due to a pick-up in retail loans as indicated by our channel checks, and continued momentum in corporate loans,” said brokerage and research firm Emkay Global in a note. “: Overall business momentum for HDFC Bank remains healthy compared to the industry, but we believe that the asset quality trend and management transition will be the key things to watch out for in the near-to-medium term,” the note said. Emkay Global has a ‘Buy’ rating on the stock with a target price of Rs 1,300 per share. In result preview, analysts at Yes Securities expect HDFC Banks net profit to grow 7% on-year basis to Rs 6,763 crore.