To buy to sell HDFC Bank share
Competition between India’s two major private lenders – HDFC Bank and ICICI Bank – has further intensified as the street closely watches their January-March quarter figures. While HDFC Bank remains the largest lender in the country, ICICI Bank has become more profitable, increasingly becoming the darling of Dalal Street.
ICICI Bank’s quarterly profit jumped nearly 60% for the January-March period, while HDFC Bank’s profit rose 22.8% in the quarter, on an annual basis.
HDFC stock has corrected 7.5% since the last trading session before March quarter earnings were announced on April 16. 12:05 p.m.
Data courtesy: Indus Equity Advisors
What makes ICICI Bank attractive?
1. Return on assets (ROA) crossed the 2% level in the fourth quarter, for the first time in at least 7 years
2. Return on equity (ROE) is the highest in at least 7 years
3. NIM is at an all-time high of 4% in Q4 (same as Q2FY22)
4. Gross Non-Performing Assets (GNPA) and Net Non-Performing Assets (NNPA) Are Low in 29 Quarters
5. High 12-quarter Current Account Savings (CASA) ratio of 48.7% (HDFC Bank at 48.2%)
6. Continues to outperform HDFC Bank in many parameters again
7. ICICI Home Finance Reports Highest PAT in 8 Quarters
8. The risk-weighted asset-to-advance ratio is 102.9%; lowest in 29 quarters
After an outstanding quarter, ICICI Bank says it will continue to focus on gaining market share while remaining focused on fairness to customers.
Krishnan ASV, Senior Analyst-BFSI, HDFC Securities told CNBC-TV18 that ICICI Bank is emerging as the industry leader while HDFC Bank is facing challenges from the past and recent merger decision. He thinks that ICICI Bank will probably be in an ideal situation in the next two years.
“They (ICICI Bank) are the industry leader right now…they are in position and the performance only reinforces the merits of that argument,” he said. The analyst also believes earnings growth would be subdued for ICICI Bank and expects a further downgrade on the stock price.
Given that market leader HDFC Bank had its own challenges in the recent past and made an unscheduled pit stop (merger), ASV says, “It is only natural that industry leadership now turns to ICICI Bank only. execution-based.
How prepared are ICICI Bank and HDFC Bank for the future?
When asked how ICICI Bank plans to bridge the gap with larger peer bank HDFC, which would expand with the largest private sector lender merging HDFC with itself, the bank’s chief executive, Sandeep Batra , told reporters that ICICI Bank is focused on organic growth and will not. look at all acquisitions, beyond portfolio purchases.
Another foreign brokerage, Credit Suisse, outperformed the stock and continues to believe the bank will deliver strong earnings as it maintained solid growth and profitability in Q4FY22. Goldman Sachs said the bank is well positioned to structurally post a higher return on assets closer to 1.9%. He maintained a “buy” rating on the bank’s shares.
While ICICI Bank already has a head start on the digital front, HDFC Bank management said it is looking to grow its digital business, giving investors confidence that the private lender will pull through. good.
Meanwhile, a senior analyst at a national brokerage that CNBC-TV18.com spoke to suggests that now is a good time to buy the drop in HDFC Bank shares. Some analysts, however, remain concerned about the HDFC mega-merger.
Barriers to HDFC Mega Merger
The first hurdle is getting clearance for the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). Bank management said they want more time but full responsibility – HDFC sources of funds are eligible to keep CRR once they enter the bank i.e. if they bring Rs 3.50 lakh crore with them, 3% of this will have to be kept as idle cash.
The second is the priority sector. HDFC invests heavily in affordable housing. So, as the book gets bigger, HDFC Bank needs to keep more money in all categories.
Third, the combined entity HDFC Bank may have to reduce its stake in the insurance company. HDFC management reportedly said they could even increase their stake, but that’s not everyone’s interpretation.
First post: STI