India’s HDFC Bank Gets Rare Analyst Downgrade on Loan Growth Concerns

Shares of HDFC Bank Ltd. fell as much as 4.2% after Nomura Holdings Inc. downgraded the stock, prompted by the lender’s lowered revision of the business absorbed from its parent.

(Bloomberg) — Shares of HDFC Bank Ltd. fell as much as 4.2% after Nomura Holdings Inc. downgraded the stock, prompted by the lender’s lowered revision of the business absorbed from its parent. 

The downgrade of India’s largest private sector bank to neutral from buy — the first since its July merger — turned the stock into the NIFTY 50 Index’s worst performer Wednesday and the biggest point drag. The shares have fallen 6% in two trading sessions. 

“We struggle to see upside over next 12 months,” Nomura analysts, led by Param Subramanian, wrote in a note Wednesday, citing concerns over HDFC’s return on assets and loan growth pressures. 

In July, HDFC Bank merged with its parent HDFC Ltd., hoping to broaden their business lines beyond traditional banking products. 

In a presentation to analysts on Monday, HDFC Bank said it valued the net worth of its parent’s business at 1.12 trillion rupees ($13.5 billion) as of July, about 16% lower than its reported number in March. 

The adjustment was due to the valuation based on Indian GAAP accounting rules and certain merger-related compliances, the company said. 

HDFC Bank has 44 buys, three holds and no sells, according to data complied by Bloomberg.

 

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