Explore HDFC Bank’s Q3 results and the 7% share dip, triggering investor concerns despite robust growth. Dive into the financial details, asset quality worries, and expert insights on the bank’s performance.
In a surprising turn of events, HDFC Bank, India’s largest private sector bank, witnessed a sharp decline of over 7 percent in its shares during noon trade on January 17. The slump followed a significant 6.7 percent drop in the US-listed American Depository Receipts (ADR) on the New York Stock Exchange (NYSE) to $61. This marks the most substantial single-day decrease since April 2022, sending ripples of concern through the investor community.
Q3 Results Overview
Despite meeting expectations on headline numbers, HDFC Bank’s October-December quarter results left investors dissatisfied as they delved into the finer details. The net profit for Q3FY24 surged by an impressive 33 percent year-on-year (YoY) to Rs 16,372 crore, in line with projections. However, this figure included a one-time tax rate gain. Net Interest Income (NII) experienced a 24 percent YoY growth, reaching Rs 28,470 crore but fell short of street estimates. Simultaneously, provisions soared by a staggering 50 percent, landing at Rs 4,216 crore.
Market Reaction
On January 16, HDFC Bank shares had closed marginally higher at Rs 1,678 each, just before the Q3 results were revealed. This marginal gain stood in contrast to the 0.2 percent fall in the benchmark Sensex. However, post the Q3 results announcement, the HDFC Bank ADR on the NYSE faced a notable setback, plunging 6.7 percent in the largest single-day drop since April 2022.
Given HDFC Bank’s substantial 14 percent weightage on the Nifty 50 index, any weakness in its performance could have a cascading effect on the overall benchmark’s stability.
Asset Quality Concerns
In addition to the financial figures, concerns arose about HDFC Bank’s asset quality. Non-Performing Assets (NPAs) witnessed an uptick to 1.26 percent in Q3FY24 from 1.23 percent in the previous fiscal year. However, the net NPA showed improvement, dropping to 0.31 percent from 0.33 percent in the same period.
Stock Performance
Over the past year, HDFC Bank’s stock demonstrated a modest gain of just over 5 percent, significantly lagging behind the benchmark Sensex, which surged by 25 percent. The bank’s shares had touched a 52-week high of Rs 1,757 on July 3, 2023.
Conclusion
HDFC Bank’s Q3 performance has left investors grappling with mixed sentiments. While the headline numbers showcased robust growth, underlying concerns regarding NII and provisions have cast a shadow on the bank’s overall performance. The asset quality challenges further add to the complexity. As investors monitor the situation, the bank faces the task of addressing these concerns to restore confidence in its financial health.
Disclaimer
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