HDFC Bank shares dip as CLSA downgrades rating and slashes target price

HDFC Bank witnessed a decline of over 1% in early trading today, following a downgrade in ratings and target price by foreign brokerage firm CLSA.

CLSA revised HDFC Bank's rating from 'Buy' to 'Outperform' and slashed its target price to ₹1,650 per share from ₹2,025. The brokerage cited the stock being at an inflection point in its journey as the reason behind this adjustment.

While acknowledging the potential long-term benefits of the merger with mortgage lender Housing Development Finance Corporation, CLSA cautioned that it poses more challenges than advantages. Particularly, it highlighted potential challenges in deposit gathering due to a high ask rate and a tough environment. CLSA suggested that HDFC Bank's net interest margin recovery might follow a 'U-shaped' trajectory rather than a swift 'V-shaped' rebound.

CLSA also revised down its estimates for HDFC Bank's deposit accretion for FY2025 to ₹4.2 lakh crore from ₹5.2 lakh crore, and trimmed its loan growth projection to 10% from 15%. Additionally, it reduced the earnings per share estimates for FY25 and FY26 by 5%.

Over the past three years, HDFC Bank's share price performance has been lackluster, recording a decline of over 7%. The stock has consistently underperformed benchmark indices, with a decline of over 13% in the past three months and more than 16% since the beginning of 2024. Over the course of one year, HDFC Bank's stock has witnessed a decline of over 9%.

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