Friday, May 24

HDFC Bank Shareholders Witness Rs 49,355 Crore Erosion in a Single Trading Session

In a startling turn of events, HDFC Bank shareholders experienced a staggering erosion of Rs 49,355 crore in the span of a single trading session. This significant devaluation sent shockwaves throughout the financial market, leaving investors and analysts perplexed by the sudden and substantial decline in the bank’s market capitalization.

HDFC Bank investors were hit hard on Wednesday as they witnessed a massive erosion of Rs 49,355 crore in a single trading session. This drastic loss was triggered by a 4 percent drop in HDFC Bank’s shares, which closed at Rs 1,563.90, according to data from the BSE. The bank’s market capitalization suffered a significant decline, plummeting from Rs 12,34,103.99 crore in the previous trading session to Rs 11,84,748.93 crore. This sharp decline in market value has raised concerns among investors and analysts, prompting a closer examination of the factors contributing to this downturn in one of India’s leading banks.


HDFC Bank Shareholders Witness Rs 49,355 Crore Erosion in a Single Trading Session
HDFC Bank Shareholders Witness Rs 49,355 Crore Erosion in a Single Trading Session


HDFC Bank, the largest private sector lender in India, experienced its worst single-day performance since May 5, 2023. This decline followed an analyst meeting where the bank disclosed that its recently completed merger with mortgage lender HDFC Limited would have an adverse impact on certain crucial financial parameters in the near term. Specifically, HDFC Bank stated that the impact on Net Interest Margin (NIM) would be slightly higher than anticipated due to increased liquidity and incremental cash reserve ratio (ICRR).

Additionally, the merger would affect the bank’s net worth by around 5 percent. However, there was optimism regarding retail deposit mobilization, which was expected to remain robust. These revelations raised concerns among investors and triggered selling pressure in HDFC Bank’s stock.

Following the merger with HDFC Limited, HDFC Bank is anticipated to see an increase in its gross bad loan ratio to 1.4 percent as of July 1, up from the standalone 1.2 percent reported in the June quarter. Moreover, the excess liquidity resulting from the merger is expected to exert downward pressure on the bank’s net interest margins, causing a reduction of approximately 25 basis points.

HDFC Bank is scheduled to release its first consolidated earnings next month, although the exact date has not been confirmed yet. The merger, effective from July 1, has created a financial powerhouse with a combined value of $40 billion.

The cautionary note regarding non-performing assets was triggered by a significant increase in bad loans within HDFC Limited’s corporate loan portfolio, leading Nomura analysts to downgrade the stock from “buy” to “neutral.” Additionally, the bank’s Net Interest Margins (NIMs) may face pressure over the next 2-3 quarters, with Nomura reducing NIM estimates by approximately 25 basis points for fiscal year 2024 and 15-20 basis points for FY25-26.

Macquarie analysts have also expressed concerns about the potential impact on long-term profitability due to the merger. Furthermore, analysts anticipate a decline in return on equity and foresee challenges for the stock in the coming 12 months.

HDFC Bank saw a 4 percent decline, closing at Rs 1,563.90, making it the top loser in the Sensex. This drop in HDFC Bank shares alone resulted in a 432-point decrease in the Sensex, according to data from BSE.

Also read: Incurred Bank Charges Despite a ‘0’ Zero Balance Account? Unveiling Common Fees and Deductions

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