Global brokerage Nomura has retained a 'buy' rating on HDFC Bank as it expects the lender to maintain robust profitability despite current slowdown and decline in asset quality. Nomura has raised its target price on HDFC Bank to Rs 2,600 as it sees a 15.2 upside potential in the stock.

Share Market Live

NSE

"We believe the current retail slowdown will impact HDFC Bank’s retail growth over FY20-21F and unlike the auto/retail slowdown in FY13/14, retail credit costs have both structurally and cyclically inched up; hence, we see small bumps in the path of HDCB’s retail juggernaut," analysts at Nomura wrote in a report.

The brokerage expects that some of the rise in HDFC Bank's credit cost to reverse as it is cyclical (autos/agri) and "with strong opex optimization, HDFC Bank should be able to record about 18 percent PAT growth over FY19-21F."

HDFC Bank's management indicated that it is focusing on engaging more with its existing client base and that should lead to market share gain and drive volumes in spite of weak OEM (original equipment manufacturer) sales, the report said.

Along with HDFC Bank, Nomura prefers ICICI Bank and Axis Bank.

HDFC Bank on July 20 reported a 21 percent year-on-year (YoY) jump in net profit at Rs 5,568.2 crore for the first quarter ended June 2019.

A CNBC-TV18 Poll had predicted a profit of Rs 5,609 crore for the quarter.

Shares of HDFC Bank settled at Rs 2231.90 apiece on the NSE on Friday, marginally up by 0.22 percent. The BSE Sensex ended 263 points higher, or 0.71 percent, at 37,332.

Domestic stock, bond, commodity and forex markets are closed on Monday on account of Ganesh Chaturthi.

So far this year, HDFC Bank has returned slightly above 5 percent, while the 1-year return on the stock is approximately 8 percent.

In the last 10 years, the private sector lender has returned almost 665 percent, while the Sensex returned over 134 percent during the same period.

First Published:Sept 2, 2019 11:37 AM IST