HDFC Bank Falls Over 9%: Here's What Went Wrong
Shares of the private lender bank tanked nearly 9%, whipping off Rs 92,984 crore from investor wealth after its Q3 net interest margin missed analysts' estimates.
The benchmark indices plunged over 2% on Wednesday, mainly due to panic selling in the index heavyweight HDFC Bank Ltd.
The Sensex saw a significant decline of 2.25%, marking its most substantial fall since Aug. 30, 2022. The Nifty also witnessed a 2.15% decline, representing its most significant drop since Jan. 27, 2023.
Shares of the private lender bank tanked nearly 9%, wiping off Rs 92,984 crore from investor wealth—the most since March 23, 2020—after its third quarter net interest margin missed analysts' estimates.
HDFC Bank's Q3 net profit rose 2.5% sequentially on higher provisions.
Net profit for the quarter stood at Rs 16,373 crore in the October–December period, as compared with Rs 15,976 crore in the previous quarter.
HDFC Bank Q3 Highlights (QoQ)
Net Profit: Rs 16,373 crore vs Rs 15,976 crore.
Net interest income: Rs 28,471 crore vs Rs 27,385 crore.
Gross NPA: 1.26% vs 1.34%.
Net NPA: 0.31% vs 0.35%.
Capital adequacy ratio: 18.39% vs 19.54%.
Core net interest margin for the bank stood at 3.4%, as of Dec. 31, and at 3.6% on an interest-earning assets basis.
Key Reasons Why Q3 Earnings Were A Miss
First, the net interest income of India's largest private lender did not rise as fast as the markets had expected. It grew about 4% on a quarter-on-quarter basis, as against the expected 8%.
Secondly, the bank failed to post a strong deposit growth. Third, the rise in HDFC Bank's bottom line was weighed down by a significant rise in provisions during the quarter. Provisions increased to Rs 4,216.6 crore in the reporting quarter, up 50% quarter-on-quarter. The provision number for the quarter is inclusive of contingent provisions, worth Rs 1,212 crore.
The bank's borrowing had spiked to 21% from 8% before the merger. Bringing the borrowing down will take some time.
On the deposit front, the bank added about Rs 41,000 crore, lower than the guided trajectory, which is also concerning due to the slowing down of its branch network.
