CLSA downgrades HDFC Bank to 'outperform' on deposits challenge, cuts target price to Rs 1,650/sh

Global brokerage firm CLSA has downgraded HDFC Bank stock to 'outperform' from 'buy' and slashed the target price to Rs 1,650 per share from Rs 2,050. The downgrade came after analysts worried over sluggish deposit mobilisation and margin recovery.

So far this year, the stock of India's largest private sector lender has tumbled over 15 percent, as against a 0.9 percent decline in the Bank Nifty index. Earlier, HDFC Bank shares had hit a 52-week low of Rs 1,363 per share on February 14, 2024.

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Analysts at CLSA warned that HDFC Bank is likely to battle twin challenges on deposits - a high ask rate and a tough environment. Additionally, they expect net interest margin (NIM) recovery to be more 'U-shaped' instead of 'V-shaped.'

"We expect the improving yields to offset muted CASA accretion, thereby keeping NIM recovery gradual. We trim FY25/26 earnings per share (EPS) estimates by 5 percent," the brokerage firm added.

That being said, analysts at HSBC had shared a 'buy' call on HDFC Bank, with a target price of Rs 1,750 per share, betting on the stock's prospects of offering returns between 15-29 percent compounded annual growth rate (CAGR) over FY24-27.

"HDFC Bank's expectations of high loan growth, and not deposits, are at core of the debacle. Lowering the loan growth may be beneficial for the stock. It would be positive for its net interest margin (NIM) or return on asset (RoA) outlook," the brokerage firm had noted.

Meanwhile, Citi analysts too 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 profitable growth in future.

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