HDFC Bank shares recover following post-merger slump, analysts see long-term potential

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HDFC Bank shares recover following post-merger slump, analysts see long-term potential
Credit: © Reuters.

Shares of HDFC Bank (NS: HDBK ) Ltd are rebounding, trading at ₹1540 on the BSE this Thursday, following a dip due to continuous sell-offs by foreign investors and an anticipated decline in key financial metrics post its merger with Housing Development Finance Corp. (NS: HDFC ). The bank had experienced a drop in its net interest margin (NIM), net worth, and asset quality after the merger.

The bank's CFO, Srinivasan Vaidyanathan, had earlier projected a 25 basis point contraction in NIM due to an increase in Cash Reserve Ratio (CRR) and excess liquidity following the merger. This concern was echoed by analysts at Macquarie.

The InvestingPro data paints a promising picture for HDFC Bank. With a P/E ratio of 2.89, the bank's shares are undervalued compared to its earnings. The bank's revenue growth has been accelerating, with a growth rate of 77.37% in the last twelve months ending in the second quarter of 2023. This robust performance is also reflected in the bank's operating income, which stands at $205.96 million.

InvestingPro Tips also offers insights into the bank's performance. HDFC Bank has been consistently increasing its earnings per share, indicating a strong financial performance. The bank is also a prominent player in the banking industry, which further solidifies its position in the market.

Despite these challenges, analysts view the stock as attractively priced, offering a positive risk-reward for long-term investors. A report from Nuvama Alternative suggests potential increases in foreign institutional investor (FII) investments that could double the stock's weight on MSCI Indices.

In the recent quarter ending in September, HDFC Bank disbursed home loans worth ₹48,000 crore and boosted gross advances to ₹23.5 trillion (UDS1 = INR83.224), indicating a robust performance despite the post-merger concerns.

For more tips on investing in HDFC Bank and other companies, check out InvestingPro. With over 12 tips and real-time metrics available, InvestingPro can provide invaluable insights into your investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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