HDFC Bank shares fall 4% as Q1 update disappoints investors

The bank has disclosed that its loan book and deposits grew 14.9% YoY and 16.5% YoY, after excluding the merger impact.

"Both loan and deposit growth are generally seasonally soft in Q1 for HDFC Bank (1-3% QoQ growth seen in loans and deposits in the last three years in Q1), but the reported numbers are a tad lower than usual, in our view," Nomura said.

While Bernstein, which has an overweight call on the private sector lender with a target price of Rs 2,100, noted that a lower CASA might offset gains from a better loan mix, Macquarie expects NIMs to remain broadly unaffected.

For the first time, the bank in the pre-Q1 update has disclosed growth in average balances for deposits as well as AUM.

According to the bank, average deposits grew a healthy 4.6% QoQ, while average AUM grew 0.8% QoQ. This is primarily because deposits in the last quarter (Q4) saw a sharp build-up towards the end of the quarter (as is normally seen in Q4), and so the base on an average basis needs to actually be deflated.

Nomura said the Q1 update seems to suggest some moderation in core NIMs on a QoQ basis in Q1. HDFC Bank's NIM at 3.44% in Q4 was still well below the 4%+ levels of other large private bank peers, it said.

Following today's downside, have been flat in the last year. A rally in the last few days was led by news of potentially increasing the weightage of HDFC Bank in the MSCI EM index. Nuvama expects the lender's weightage in the global index to double to 7.2%-7.5%, potentially bringing in $3.2 billion to $4 billion in inflows.