Shares of HDFC Bank Ltd. have fallen for the second consecutive day, even after reporting robust December quarter (Q3) results. The bank’s stock was among the top losers on the Nifty 50 index on Tuesday, January 6, contributing to the market decline.
Strong Q3 Performance
HDFC Bank’s loan book grew 12% YoY in Q3, marking the first double-digit growth since its mega merger with HDFC Ltd. The growth reflects increasing demand for credit and a strong post-merger performance on a normalized base.
The bank’s deposits displayed a similar trend with an 11.5% YoY growth rate, exactly matching that of the loans, which is a clear sign of the bank’s strong financial support through deposits for its lending operations. According to the analysts, the numbers point to a complete financial picture with gradual growth in both assets and liabilities.
Why Are Shares Falling?
Even with such robust fundamentals, HDFC Bank’s stock is down by 1.5% to ₹962.9 on Tuesday, after a decline of 2.5% on Monday. The principal worry for the investors is the Loan-to-Deposit Ratio (LDR):
- The LDR rose by 50 basis points this quarter to nearly 99%, significantly above management guidance to maintain it below 90%.
- A high LDR signals that the bank’s deposit base may limit future loan growth, as lending is approaching the bank’s capacity relative to its deposits.
This has raised questions about the bank’s growth trajectory for FY27, despite management guidance that the bank expects higher growth than the industry average next year.
Analyst Outlook
HDFC Bank remains a strong performer in the eyes of analysts:
- 48 analysts cover the stock
- 46 recommend “buy”
- 2 recommend “hold”
While short-term trading reflects concerns over LDR and near-term liquidity, analysts remain confident in the bank’s long-term growth prospects and post-merger integration success.
Key Takeaways
Majority of analysts maintain “buy” rating
Loan growth at 12% YoY, deposits up 11.5%
LDR increased to 99%, exceeding near-term guidance
Shares down for 2nd day despite strong fundamentals
Market watching FY27 growth potential closely
