HDFC Bank shares plunge 6% despite robust Q3; here’s why

Shares of HDFC Bank plunged as much as 6.5% in early trade on Wednesday to hit a low of ₹1,570 apiece on the BSE after the private sector lender’s U.S.-listed ADR (American Depositories Receipts) dropped 6.71% to $61.18 in the New York Stock Exchange. This is the biggest single-day drop in the company’s ADR since April 2022, when it declined to 7.5%. The fall in the bank’s ADR was due to lower than expected growth in net interest income.

Notably, the Nifty 50 Index also declined by 0.96% to 21,820, weighed down by fall in index heavyweights. HDFC Bank commands 14% weightage in the Nifty 50 index, the highest amongst other constituents. 

The share price of HDFC Bank, the country’s largest private sector lender, opened at ₹1,583.85, down by 5.66%, as against the previous closing price of ₹1,678.95. At 9:49 am, the share price of the company was trading 5.65% lower at ₹1,584.05. This was in line with the broader BSE Sensex, which plunged 712.59 points or 0.97% to 72,416.18.

The bank hit a 52-week high of ₹1,757.80 on July 3 last year and a 52-week low of ₹1,460.55 on October 26 last year. The private lender’s market capitalisation stood at ₹12,05,420.84 crore with more than 4.32 shares exchanging hands on the BSE, as against the two-week average of 4.53 lakh shares.

Notably, in the October to December quarter, the profit of the private lender surged by 33.5% year-on-year to ₹16,370 crore as against ₹12,259 crore in the same period last year. The bank's net interest income (NII) witnessed a growth of 23.9% to ₹28,470 crore as against ₹22.990 crore in the corresponding period of the previous year.

"The bank's net revenue surged 25.8% to ₹39,610 crore for the quarter ended December 31, 2023, from ₹31,490 crore in the year-ago period. The core net interest margin for the said quarter stood at 3.4% on total assets and 3.6% based on interest-earning assets. The bank earned ₹11,140 crore as "other income" during the quarter against ₹8,500 during the year-ago period.

HDFC Bank's operating expenses for the quarter were recorded at ₹15,960 crore, an increase of 28.1% over ₹12,460 crore during the corresponding quarter of the previous year. The bank's cost-to-income ratio stood at 40.3% during Q3 FY24.

Provisions and contingencies for the quarter were at ₹4,220 crore against ₹2,810 crore in the year-ago period. "Total provisions for the current quarter included contingent provisions of ₹1,220 crore," the bank says.

 The bank's total deposits surged by 27.7% YoY at ₹22,14,000 crore as compared to December 31, 2022. The CASA (current account and savings account) deposits grew 9.5%, with savings account deposits at ₹5,79,900 crore and current account deposits at ₹2,55,800 crore.