According to a report, global brokerage company BofA downgraded the bank stock from a "buy" to a "neutral," which caused HDFC Bank's share price to trade in red on Wednesday. The share price of HDFC Bank fell by more than 0.48 percent to ₹1,628.
The goal price per share has been reduced from ₹1,850 to ₹1,830 because the majority of the favorable variables have already been taken into consideration.
Following an amazing surge since February, investors' concerns about HDFC Bank's deposit data following its merger with the erstwhile HDFC, led to this rating. A limited risk-reward range is anticipated by BofA analysts for HDFC Bank's shares over the next 12 months, after the company has risen 20 percent from its February lows, mostly due to optimism about index weight.
We are negotiating a challenging FY25 in which the short-term risk-reward ratio is restricted. We anticipate that catalysts will only begin to manifest in FY26. Furthermore, a shallow cycle of rate cuts will postpone HDFC Bank's NIM recovery, according to the brokerage company.
BofA analysts predict that a shallow rate decrease cycle would delay NIM recovery, with meaningful triggers probably not materializing until FY26. For the upcoming year, BofA believes that the stock's risk-reward profile will be contained inside a small range.
A business update for the quarter ending in June (Q1FY25) was recently provided by HDFC Bank. Although it was constant sequentially, the private sector lender's deposit base climbed by 24.4 percent year over year to ₹23.8 lakh crore in Q1. Over the previous year, deposits increased by 16.5% when the merger's effects were taken into account.
According to the bank, average AUM climbed by 0.8% on a quarter-over-quarter basis, while average deposits climbed by a healthy 4.6%. This rise is mostly explained by a notable deposit accumulation that occurred around the conclusion of the preceding quarter (Q4), which is usual for Q4. As such, it is appropriate to see the average base figure for deposits as considerably overstated.
