Synopsis: HDFC Bank, India's leading private lender, saw its shares decline by over 3% following its Q1 financial report, which revealed a decrease in loans and stagnant deposit growth compared to the previous quarter. The bank's gross advances fell by 0.8% sequentially, while deposits showed no growth, disappointing analysts who had anticipated better performance.
HDFC Bank shares fell over 3% on Friday after India's top private lender reported a decline in loans and no increase in deposits for the three months ended June 30.
The bank's gross advances dipped 0.8% sequentially in the first quarter, and deposit growth remained flat, which Jefferies analysts described as "slightly disappointing."
Shares of HDFC Bank, which are down 2.4% this year compared to an over 11% gain in the benchmark Nifty 50 index, faced their biggest one-day drop since June 4.
Earlier this week, the stock hit a record high on expectations of a larger weight in a key MSCI index.
HDFC Bank emerged as the top loser on the Nifty 50 index on Friday.
The bank's merger with its non-bank lender parent last year added a substantial pool of mortgage loans but a much smaller amount of deposits to its portfolio.
As of June's end, the bank's advances stood at 24.87 trillion rupees ($297.91 billion), while deposits were at 23.79 trillion rupees.
Low-cost current and savings account deposits fell 5% sequentially to 8.64 trillion rupees in the quarter.
$1 = 83.4810 Indian rupees.
In conclusion, HDFC Bank's recent financial performance has led to a significant decline in its stock price, reflecting investor concerns over sequentially weak loan and deposit growth.
Despite hitting a record high earlier this week, the bank's shares faced their largest one-day drop in over a month, making it the top loser on the Nifty 50 index.
The merger with its non-bank lender parent, while adding substantial mortgage loans, did not bolster deposit growth as expected.
Moving forward, the bank will need to address these challenges to regain investor confidence and improve its financial standing.
