Analysts raise target prices on HDFC Bank

Mumbai: Bank shares were among the top gainers on Monday led by public sector lenders on news reports the government is looking to privatise them and possibly give prospective owners full control.

The Bank Nifty index jumped 3 per cent also on optimistic commentary by India’s largest private lender HDFC Bank on the business moratorium and improving asset quality.

Among public sector banks, Bank of Baroda soared 8.3 per cent, Central Bank of India spurted 9.8 per cent and SBI surged 4.1 per cent, driving the Nifty PSU Bank index by 4.2 per cent. Federal Bank, ICICI Bank, Axis Bank, City Union Bank and RBL Bank gained 4-8 per cent. HDFC Bank shares, which have risen 15 per cent in the past month, eked out 0.2 per cent to close at Rs 1,202.35 on Monday.

“The commentary from HDFC Bank was positive and encouraging. The same is being expected from other banks as well if their operating environment is also seeing an improvement in line with what HDFC Bank has reported,” said Lalitabh Shrivastava, AVP-Research at Sharekhan.

HDFC Bank on Saturday reported an 18.4 per cent year-on-year growth in its net profit at Rs 7,513 crore on strong growth in interest earnings and other income. The bank said that its retail collections stood at 95 per cent in September and is expected to reach 97 per cent by October-end.

Brokerages raised the target price on HDFC Bank’s shares after the September quarter numbers. Ambit, Edelweiss, Haitong Securities, Investec, Jefferies, Kotak Institutional Equities, Macquarie and Morgan Stanley raised target price by 2-22 per cent.

“HDFC Bank management painted a very positive outlook for the bank when it comes to asset quality,” said Macquarie, raising target price by 22 per cent mainly on account of rolling forward to FY23-based valuation.

Investec, which raised target price by 13.4 per cent to Rs 1,425 while retaining a buy rating, said asset quality disclosures from HDFC Bank have been significantly better than peers. It is a reflection of its superior customer franchise and better credit underwriting. “Valuations will soon anchor to growth where the asking rate is quite high for the next 2-3 quarters due to high base effect,” said Investec.