HDFC Bank market cap hits Rs 13 trn mark

HDFC Bank's market capitalisation (market cap) touched Rs 13 trillion in Thursday's (December 28, 2023) intra-day trades as the largest private sector lender is set to report its sharpest monthly rally in the past two years.

At 10:33 AM; HDFC Bank's market cap stood at Rs 13.03 trillion, the BSE data shows.

The stock was up 1 per cent at Rs 1,717.90 in intra-day trades on December 29, inching towards its record high of Rs 1,757.80 touched on July 3, 2023.

In the month of December, HDFC Bank outperformed the market by surging 10 per cent, as compared to 7.8 per cent rise in the S&P BSE Sensex.

The bank recorded its sharpest monthly gain since August 2021, when it had rallied 10.9 per cent during the month, data shows.

On July 17, 2023 HDFC Bank allocated over 3,110 million new shares of the bank to shareholders of merged entity HDFC Ltd.

HDFC Bank is a leading private sector bank with consistent growth and operational performance over various cycles.

Post merger, the bank has become the second largest in terms of size with a diversified portfolio.

The bank has maintained superior return ratios compared to its peers resulting in premium valuations.

Merger of HDFC Bank & HDFC Ltd has led to accretion of Rs 6 trillion of asset base and Rs 6.4 trillion of liabilities.

Management remains confident of integration benefits with substantial cross selling opportunities, thus, expecting the merged entity to grow at 17-18 per cent in FY24E (with receding of non-individual book from parent), according to analysts at ICICI Securities.

Motilal Oswal Financial Services (MOFSL) has a 'buy' rating on HDFC Bank with a target price of Rs 1,950 per share.

HDFC Bank has everything in place to deliver strong profitability and growth trajectory over the coming years (similar to pre-merger levels) and the management believes that execution remains the most important factor for the bank.

HDFC Bank is confident of sustaining the steady growth momentum and has highlighted that it has been able to maintain its incremental market share of Rs 16-20 per cent despite an increase in its size.

While execution at such a large scale is inherently complex, especially amid intense competition for liabilities and rates staying elevated for longer than initially thought, we expect the bank s operating performance to recover gradually over FY25/FY26, the brokerage firm said in a management meet update.

MOFSL expect margins to recover to 3.7 per cent by FY26E and expect improvements in cost ratios, which should enable a Rs 22 per cent CAGR in Pre-provision operating profit (PPoP) over FY24-26E, leading to RoA/RoE of Rs 2 per cent/17 per cent by FY26E (thus reaching back to pre-merger levels).

Meanwhile HDFC Bank had reported healthy earnings growth in Q2FY24, led by healthy growth in the operating income and lower tax rate.

The return on assets continued to be around 2.0 per cent during the quarter, led by healthy profitability.

Thus, the management is confident of maintaining the superior return ratios in the long run.

The retail & commercial and rural banking (CRB) segments continued to drive credit growth and were also aided by the HDFC Ltd portfolio.

Retail segment & granularity of the portfolios are expected to be the key growth drivers on the credit as well as deposit fronts.

NIMs were under pressure during the quarter, primarily because of the excess liquidity on the books.

Thus, HDFC Bank is expected to restructure its borrowing mix and strive for higher deposit growth in coming quarters to regain its NIMs levels, as the bank believes that the worst is over in terms of margin compression, analysts at KRChoksey Shares and Securities said in the result update.