HDFC Bank shares continued their decline, dropping over 3 per cent as its US-listed shares experienced a 9.1 per cent fall to $55.5, the largest single-day drop since March 2020.
Over the past two days, HDFC Bank's American Depository Receipts (ADR) suffered a decline of over 15 per cent, contributing to a more than 10 per cent slump in the domestic HDFC Bank stock.
The decline in HDFC Bank shares on January 17, when they fell over 8 per cent to close at Rs 1,536, followed disappointing results for the October-December quarter (Q3FY24). This marked the biggest single-day decline in over three years and significantly impacted the Nifty 50 index, where HDFC Bank holds the largest weightage of over 14 per cent.
The weakness in HDFC Bank shares had a cascading effect on other banking stocks, particularly private sector lenders, leading to a 4 per cent drop in the Bank Nifty index, the highest single-day fall since March 2022.
HDFC Bank's challenges emerged after it reported a notable miss in net interest margins (NIM) in Q3 FY24, attributed to a higher cost of funds. Additionally, higher provisions and a decade-low earnings per share (EPS) growth in Q3 contributed to the decline.
Despite the management's guidance that NIM would gradually improve over the next few quarters, brokerages remained sceptical about the pace of recovery. While most analysts lowered their target price for the stock, many retained a bullish outlook due to attractive valuations.
In Q3 FY24, HDFC Bank's NIMs remained flat quarter-on-quarter at 3.6 per cent, while provisions increased by 39 per cent sequentially. The bank reported a 4 per cent QoQ increase in net interest income (NII) and a modest 2.5 per cent QoQ rise in net profit.
(With PTI inputs)
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