HDFC Bank stock hits record high, advances 25% in three months

Shares of HDFC Bank hit a record high of Rs 1,308, up 3 per cent on the BSE on Friday, surpassing its previous high of Rs 1,304.10, touched on December 19, 2019.

The stock of the private sector lender has outperformed the market by surging 10 per cent in the past week, as compared to a 5.6 per cent rise in the S&P BSE Sensex. In the past three months, it has rallied 25 per cent, against a 10 per cent gain in the benchmark index.

HDFC Bank had reported healthy September quarter (Q2FY21) results with net profit growing 18.4 per cent year-on-year (YoY) at Rs 7,513 crore on the back of substantial growth in interest earnings and other income.

Net interest income (NII) of the bank for Q2FY21 grew 16.7 per cent YoY at Rs 15,776 crore, driven by asset growth of 21.5 per cent and a core interest margin for the quarter of 4.1 per cent. On the asset quality front, gross non-performing assets (NPAs) of the bank fell to 1.08 per cent of the gross advances as of September 30, 2020, as against 1.38 per cent a year earlier. Likewise, net NPAs, too, came down to 0.17 per cent from 0.42 per cent.

The company's management remains optimistic about a cyclical recovery. Loan against property (LAP) and retail working capital loan disbursals are already at pre- Covid levels and unsecured loans will reach pre-Covid levels by October. Bureau data shows that inquiries for auto and home loans have moved above pre-Covid levels.

"Overall business momentum for HDFC Bank remains healthy compared to the industry, but we believe that the asset quality trend and management transition will be the key things to watch out for in the near-to-medium term," analysts at Emkay Global Financial Services said in a result update.

With a focus on top-end customers across segments, superior underwriting, and healthy provisioning and capital buffers (CET 1 ratio at 17 per cent), analysts at Dolat Capital expect HDFC Bank to be amongst the best-placed amidst current uncertainty.