HDFC group shares fall on profit-booking; HDFC, HDFC Bank slip up to 4%

HDFC Bank slipped 3 per cent to Rs 2,301 on the BSE in the early morning deals on concerns that sluggish auto industry and pressure in MSME and agriculture sector is likely to impact the growth.

Shares of HDFC group companies on Monday came under pressure, falling by up to 6 per cent on the BSE in the early morning trade on profit-booking.

Housing Development Finance Corporation (HDFC), HDFC Bank, HDFC Asset Management Company (AMC) and HDFC Life Insurance were down in the range of 2 per cent to 6 per cent on the BSE. In comparison, the S&P BSE Sensex was down 0.79 per cent at 38,034 level at 10:04 am.

Thus far in the calendar year 2019, all these four listed group stocks have rallied between 12 per cent and 53 per cent, against a 6 per cent rise in the benchmark index till Friday.

HDFC Bank slipped 3 per cent to Rs 2,301 on the BSE in the early morning deals on concerns that sluggish auto industry and pressure in micro, small & medium enterprises (MSME) and agriculture sector is likely to impact the growth going ahead.

HDFC Bank on Saturday posted a 21 per cent year-on-year (YoY) rise in standalone net profit at Rs 5,568 crore for the quarter ended June 2019 (Q1FY20), on the back of higher other income and lower cost to income ratio. The net interest income (interest earned less interest expended) for the June quarter grew by 23 per cent to Rs 13,294 crore on YoY basis, driven by net interest margin (NIM) which stood at 4.30 per cent and loan book growth of 17 per cent.

The gross non-performing assets (NPA) ratio increased by 4 basis points (bps) quarter on quarter (QoQ) to 1.40 per cent while the net NPA stood at 0.43 per cent, up 4 bps QoQ. The slippages during the quarter were Rs 4,225 crore due to higher slippages from agriculture portfolio.

“Loan growth of HDFC Bank has got impacted with the slowdown in consumption story of Indian market. Further management has turned conservative for unsecured loan and has stepped up the provisioning norm. Coupled with high provisions on agri portfolio is likely to keep provisioning rate at elevated level,” analysts at Narnolia Financial Advisors said in the result update.

“With the economic slowdown and consumption, and the caution in unsecured book (on a high base), the advance growth is expected to taper. We maintain that larger banks are better placed, with their ability to capture higher credit quality growth and the benefits of their scale. With the bank’s credit quality underwriting and market position, we believe it is likely to fare well in situations of extreme stress and the challenges despite the likely dent in earnings in the medium term,” according to the analysts at Dolat Capital.

Among other group stocks, HDFC was down 4 per cent to Rs 2,204 on the BSE. The stock was the biggest loser among the S&P BSE Sensex stocks at 10:38 am. The country's largest mortgage lender is scheduled to announce Q1FY20 earnings on August 2, 2019.