HDFC Bank gets a ‘buy’ call from HSBC with over 22% upside

Analysts believe that the stock offers possible returns of 15-29 percent compounded annual growth rate (CAGR) over FY24-27

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Global brokerage firm HSBC shared a ‘buy’ rating on HDFC Bank with a target price of Rs 1,750 per share, implying an upside of 22 percent from the current levels. The positive call stems from the prospect of the stock offering returns in 15-29 percent compounded annual growth rate (CAGR) over FY24-27, said analysts.

The HDFC Bank stock has lost over 16 percent so far this year, as against a 2 percent drop in the benchmark Sensex. The shares of the private sector lender hit a 52-week low of Rs 1,363 on February 14, 2024.

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HSBC analysts believe that HDFC Bank’s expectations of high loan growth, and not deposits, are at core of the debacle. “Lowering the loan growth may actually be beneficial for the stock. It would be positive for its net interest margin (NIM) or return on asset (RoA) outlook,” the brokerage firm said.

Earlier, analysts at Citi were bullish on HDFC Bank as they shared a target price of Rs 2,050 on the stock. They bet on the lender’s robust and sustainable franchise, which is poised to fuel a profitable growth in future.

Also read: HDFC Bank stock call: ‘Buy’ from Citi with 44% upside on strong franchise; Check target price

“HDFC Bank is aiming to maintain a healthy incremental liquidity deposit ratio (LDR) and liquidity coverage ratio (LCR). To offset increased funding costs, the company plans to adjust lending rates accordingly. It aims to maintain net interest margin (NIM) and return on assets (RoA) within the target range,” the brokerage said.

Morgan Stanley shared an ‘overweight’ rating on HDFC Bank with a target price of Rs 2,110 per share. The bullish call came after the management said that it recorded stable and healthy double-digit year-on-year (YoY) growth in its home loan business after merger till December 31, 2023.

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