HDFC Bank share price extends decline; stock falls over 7% this week

livemint.com:

HDFC Bank share price extended decline for the third straight session on Thursday amid heavy selling in the banking heavyweight. HDFC Bank shares fell as much as 1.65% to ₹1,538.05 apiece on the BSE. HDFC Bank stock has lost more than 7% this week so far.

Selling in HDFC Bank shares comes on the back of mixed brokerages views on the stock after the country’s largest private-sector bank, in an analyst call, shared particulars of the merged entity. The lender pointed out the possibility of a worsening of net interest margin (NIM), net worth and asset quality in the short term following its merger with parent Housing Development Finance Corporation (HDFC). Foreign brokerage firm Nomura downgraded its rating on HDFC Bank to ‘Neutral’ and cut the target price to ₹1,800 per share from ₹1,970 earlier.

“Downward adjustment to the incoming net worth of HDFC Ltd (largely due to IGAAP accounting and provisioning harmonization) amounts to a BVPS cut of ₹23 per share for the merged entity," Nomura said. It expects NIMs could see pressure over the next 2- 3 quarters as HDFC Ltd’s Q2FY24 opening book NIMs are at 2% versus 2.7% in Q1. This is mainly on account of excess liquidity being carried post-merger.

Also Read: SJVN share price cracks 10% as OFS opens; board meet ahead to consider divestment Nomura has cut its NIM estimates by 25 bps in FY24 and 15-20 bps in FY25-26. “Our FY24F EPS has been cut 9%, with ~5% cuts in FY25-26F. Our FY24 RoA estimate is now at 1.7% (vs 1.9% earlier), gradually improving to 1.8% in FY25-26F," Nomura said.