HDFC Bank hit new high; market cap crosses Rs 4 lakh crore

HDFC Bank hit a new high of Rs 1,567 on BSE have seen it market capitalisation (m-cap) crossing Rs 4-lakh crore.

At 2:53 pm; the stock of private sector lender was trading 1% higher at Rs 1,564, extending its 8% surge in past seven trading sessions after reported a healthy set of numbers for the quarter ended March 31, 2017 (Q4FY17) recording strong growth in net interest income (NII) and improvement in operating parameters. The S&P BSE Sensex was up 2.4% in past eight trading sessions since April 17.

HDFC Bank, with m-cap of Rs 400,654 crore, now joined Reliance Industries (RIL) and Tata Consultancy Services (TCS) which having m-cap of Rs 457,332 crore and Rs 456,154 crore, respectively, the BSE data shows.

During the last two quarters when the economic conditions for banking industry remained challenging, HDFC Bank showed strong growth in business as well as profitability. HDFC Bank with resilient assets quality (NNPA at 0.3%), adequate capital adequacy ratio (CAR ratio around 14.6%), strong low cost deposits base (CASA>45%), healthy NIM at 4.3% and strong business growth of around 20%, is best placed compared to industry and close peers.

“Given the bank’s strengthening liability franchise, low exposure to stressed sectors, high capitalization ratio and superior products offering, we are of the view that HDFC Bank will continue its streak of consistent performance,” Choice Institutional Research said in results analysis, maintain ‘buy’ rating on stock with the revised potential price of Rs 1,720 per share.

JP Morgan said HDFC Bank reported a strong post-demonetization bounce-back on both loan growth and fees.

There was a spike in credit costs largely driven by underlying post demonetization stress and exacerbated by one-offs. HDFC Bank’s competitive position continues to improve and should drive sustained growth for the next three to four years we believe, the foreign brokerage said in Q4 results update, remain overweight on the stock with price target of Rs 1,700.

Best-in-class liability franchise, expansion of rural/semi-urban branches and improvement in productivity owing to digital focus will ensure that the bank delivers above-industry earnings growth — 16-18% CAGR over FY17-19E, albeit lower than trend — and sustains superior return ratios (RoAs of 2%), according to Edelweiss Securities said in a report.

Also, the Reserve Bank of India (RBI’s) directive on recognition & stress reporting divergence may weigh on the sector as a whole, but the bank seems to be better placed than other corporate banks given its superior retail franchise which will drive outperformance in near to medium term, the brokerage firm said in result update, maintain ‘buy’ rating on the stock with target price of Rs 1,734.