HDFC Bank sees double-digit growth, Morgan Stanley predicts up to 50% upside

Shares of HDFC Bank gained nearly 1 percent to Rs 1,424 per share on February 16 after global brokerage firm Morgan Stanley shared an 'overweight' rating on the counter, with a target price of Rs 2,110 per share, implying an upside of 50 percent from the last close.

The bullish call came after the management said that it recorded stable and healthy double-digit year-on-year (YoY) growth after merger till December 31, 2023.

Since the announcement of Q3FY24 results, the stock of India's largest private lender was down 15 percent as investors were disappointed with margin strain, decadal fall in earnings per share (EPS), and sluggish deposits.

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However, the management on February 15 said that HDFC Bank recorded 3.6 percent sequential growth as of December 2023 and, after the merger, savings accounts for incremental disbursals have moved to 80 percent from 35 percent.

The bank’s market share has grown by 18-20 percent on incremental disbursals. On a sequential basis, the bank has gained a leading position as it recorded a growth of 3.6 percent which was the highest among its peers in home loans.

"HDFC Bank's fundamental strategy has been to improve the turnaround time of processing at the front end. The post-merger turnaround time has been reduced to almost a third. This, coupled with the erstwhile HDFC strength of connecting with customers in person, is a potential game-changer in terms of both sales turnover and cross-selling," the management said.

Analysts at Morgan Stanley shared its bullish call, saying that accelerated market share gains would improve CASA cross-selling in upcoming quarters. "The company gave details on home loan business after the merger. The turnaround time has improved amid higher market share gains," the brokerage firm noted.

Additionally, the lender plans to launch home saver product in April and home refurbishment loans in the coming months. These two products will strengthen the base of lucrative offers for home buyers.

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