HDFC Bank share price: HDFC Bank shares may rally over 40% post Q4 results; should you buy?

Brokerages maintained ‘buy’ calls on HDFC Bank after the private lender on Saturday posted a 17.7 per cent year-on-year (YoY) rise in March quarter profit at Rs 6,927.70 crore on healthy interest income.

Net interest income – the key gauge of profitability, which is interest earned minus interest expended – rose to Rs 15,204.10 crore in March quarter from Rs 13,089.50 crore in the a year ago period, driven by 21.3 per cent growth in advances and 24.3 per cent growth in deposits.

ICICIdirect is positive on HDFC Bank with a price target of Rs 1,339, indicating an upside of nearly 42 per cent from current market price.

The scrip traded 3.94 per cent higher at Rs 946 around 9.20 am (IST), while the benchmark BSE Sensex was up 0.23 per cent at 31,661.

“HDFC Bank shored up its contingency buffer (in these uncertain times) in Q4FY20 leading to over 150 basis points credit cost and earnings miss, despite steady core earnings. Core operating performance was stable in March quarter with sustained business momentum (loan growth of 21 per cent), better NIMs (up 10 basis points to 4.3 per cent) and curtailed slippages at 1.2 per cent (excluding moratorium benefit),” ICICIdirect said.

Net interest margin for the quarter stood at 4.3 per cent. On the asset quality front, gross non-performing assets (NPAs) as a percentage of gross advances as of March 31, 2020 improved to 1.26 per cent from 1.36 per cent at end of March 2019.

In absolute terms, gross NPAs or bad loans stood at Rs 12,649.57 crore compared with Rs 11,224.16 crore a year ago.

IDBI Capital Market expects over 15 per cent rise in HDFC Bank’s share price with a price target of Rs 1,100.

“HDFC Bank’s profitability was impacted by contingent provisions related to Covid-19 impact. However, asset quality remained stable. The bank continued to command highest market share among private banks. We believe the bank will traverse through these tough times and gain market share led by strong leadership position across segments, large distribution, digital focus and strong capital adequacy,” the brokerage said.

Provisions for bad loans and contingencies for March quarter of FY20 were raised to Rs 4,216.50 crore on a consolidated basis, more than double from Rs 2,063.52 crore reported for the corresponding period of 2018-19.