HDFC Bank hits new high as FPIs hike stake for third straight quarter

Between March and December, FPIs purchased an additional 129 million, or 2.67 percentage point stake, in the bank

Shares of HDFC Bank rose for the third straight day and hit a fresh record high of Rs 1,488, up 2.5 per cent, on the BSE  on Tuesday. The stock has risen 5 per cent in the past three trading sessions after foreign portfolio investors (FPIs) increased their stake in the private sector lender for the third quarter in a row.

According to the December 2020 quarter shareholding pattern filed by HDFC Bank, FPIs stake in the bank increased to 39.35 per cent from 37.43 per cent at the end of September quarter. FPIs held 36.68 per cent stake in the March quarter and 37.04 per cent at the end of June quarter, data shows.

During the nine months between March and December, FPIs purchased an additional 129 million, or 2.67 percentage point stake, in HDFC Bank. The bank's share price has more-than-doubled from its 52-week low level of Rs 739, touched on March 24, 2020.

Meanwhile, last week, HDFC Bank reported a healthy 16 per cent year-on-year (YoY) or 4 per cent quarter-on-quarter (QoQ) credit growth at Rs 10.8 trillion for the October-December quarter (Q3FY21), mainly driven by retail (festive pick-up) and amid continued momentum in working capital corporate loans.

Deposit growth moderated further to 19 per cent YoY (3 per cent QoQ) to Rs 12.7 trillion, while the CASA ratio improved 140 basis points (bps) QoQ to 43 per cent - a phenomenon seen across banks.

Though management has not provided any update on recent asset quality behaviour, we believe that HDFC Bank should reflect the general positive asset quality experience indicated by other players in the industry, analysts at Emkay Global Financial Services said in a stock update.

“We believe that overall business momentum for HDFC Bank remains healthy compared to the industry. A structurally better cost-income ratio and high provisioning buffer (0.7 per cent of loans in Q2) should help absorb the ensuing moderate asset-quality risk, leading to continued healthy return ratios,” the brokerage firm said.

However, in the wake of a spate of recent management churn and adverse events, including misconduct in auto business and new card acquisition suspension, we believe that the new top management has a task cut out to overcome these hurdles and sustain its historic management premium, it added.