HDFC Bank shares decline after CLSA downgrades stock to ‘outperform’, cuts target price

HDFC Bank share price target has been cut sharply to ₹1,650 per share by CLSA, who said the stock is at an inflection point in its journey.

HDFC Bank shares fell over one per cent in early trade today (March 11). This comes after foreign brokerage firm CLSA downgraded the ratings and cut its target price on the stock. At 10:15 am, HDFC Bank shares traded 1.16% lower at ₹1,429.60 apiece on the BSE. CLSA downgraded HDFC Bank to ‘Outperform’ from ‘Buy’. The brokerage firm also cut the target price sharply to ₹1,650 per share from ₹2,025 as it said that the stock is at an inflection point in its journey.

HDFC Bank share price: The share price of HDFC Bank fell over one per cent. (Reuters)

Merger with mortgage lender Housing Development Finance Corporation (HDFC) does provide long-term benefits, the firm said but it poses more challenges than upsides, CLSA warned.

It also said that HDFC Bank may face two challenges on deposits - a high ask rate and a tough environment. NIM recovery for HDFC Bank will be more ‘U-shaped’ than ‘V-shaped’, it said, adding, “The deposit-gathering requirement increases significantly, and coincidentally, in an environment where deposit growth is challenging for the banking sector. We believe HDFC Bank will be prudent when it comes to deposit pricing and sacrifice growth, if the need so arises."

The foreign brokerage house cut HDFC Bank's deposit accretion estimates for FY2025 to ₹4.2 lakh crore from ₹5.2 lakh crore. It also cut its loan growth to 10% from 15% and trimmed its FY25 and FY26 earnings per share (EPS) estimates by 5%.

In the past three years, HDFC Bank share price performance has been lukewarm, down over 7%. The stock has underperformed the benchmark indices. HDFC Bank shares have fallen over 13% in the past three months and more than 16% in 2024 so far. In one year, the stock has declined over 9%.