1:5 & 1:2 Split, 1.3% Yield: HDFC Bank Dividend, Q4 Results Soon; Stock, ADR Down YTD - What To Expect?

India's third largest stock in terms of market value, HDFC Bank's 2024 so far has been broadly under pressure due to a challenging near-term outlook. YTD, both its share price and American Depositary Receipts (ADR) have fallen between 15-18%. Despite this, HFDC Bank is planning to reward its investors with a dividend payout. Also, the company has declared the date of its Q4FY24 announcements.

HDFC Bank Share, ADRs:

On BSE, HDFC Bank's share price stood at Rs 1,442.95 apiece, marginally down on Friday with a market cap of Rs 10,96,154.91 crore. The stock's 52-week high and low is at Rs 1,757.80 and Rs 1,363.45 respectively. {image-hdfc600-1711149919.jpg www.goodreturns.in

Meanwhile, the private bank's ADR listed on NYSE stood at $54.39 down by 2.19% on March 22nd.

In the trading week that went by, HDFC Bank shares were down marginally, while its ADR plunged over 2.1%. However, year-to-date, the stock price has tumbled by 15.15% and that of ADR is down by 18.36%.

HDFC Bank Upcoming Dividend, Q4:

In its regulatory filing this week, HDFC Bank said, the meeting of the Board of Directors of HDFC Bank Limited ("the Bank") will be held on Saturday, April 20, 2024, to inter-alia consider the following:

- Audited financial results for the year ended March 31, 2024, along with the consolidated accounts for the year ended March 31, 2024.

- Proposal for recommendation of dividend on the equity shares of the Bank for the financial year ended March 31, 2024.

The last dividend payout was to the tune of Rs 19 per share last year. As per Trendlyne data, the bank has delivered up to 24 dividends since April 2001. Currently, it has a dividend yield of 1.32%.

HDFC Bank Other Corporate Affairs:

HDFC Bank Stock Split: The bank has significantly split two times, becoming affordable for investors before surging in long. Stock splits increase demand for a stock, improve liquidity and further become cheap. HDFC Bank had that scenario twice. The first stock split was of a 1:5 ratio in July 2011, where its face value of Rs 10 was trimmed to Rs 2 each. Followed by another stock split of 1:2, where the face value slipped from Rs 2 to Rs 1.

HDFC Bank Q3 Earnings: In Q3FY24, HDFC Bank's net profit came in at Rs 16,372 crore, registering a growth of 33% from Rs 12, 259 crore a year ago same quarter. While its net interest income (NII) saw a growth of 24% YoY to Rs 28,470 crore. While the bank's core net interest margin was at 3.4% on total assets, and 3.6% based on interest-earning assets.

What To Expect?

In the early days of April, one can expect HDFC Bank to announce provisional data for Q4 covering its balance sheet such as advances and deposits along with its liquidity stance. This will provide what can be expected from HDFC Bank's Q4 earnings.

There were reports that HDFC Bank's loan book is expected to squeeze to 10%, which has been expressed as worrisome. However, the long-term trajectory for HDFC Bank is healthy.

For the long term, brokerage LKP Securities earlier in its report said, "We expect the FY25E and FY26E ROA to stay at 1.9% with ROE to stay above 15%. The C/I ratio is likely to narrow down to below 40% (38.8% for FY25E and 38.5% for FY26E). The bank's NIM is to improve to ~3.9% in FY25E/ FY26E (v/s 3.6% in 3QFY24) with the help of a better loan mix (reducing portion of HL book) and lower COF (higher deposit growth with rapid branch expansion)."

LKP's note added, "We have incorporated YOA (calculated) of 9.2% in FY25E/FY26E against FY24 YOA (calculated) of 9.1%. The COF is expected to stay stable given high-interest rate scenario."

On credit growth, LKP's note said, "We expect the loan growth of 20% and above (way above the sector growth). Mostly the growth is expected to come from high-yielding unsecured credit. The current loan book composition has a 30.4% share of HL (post-merger) which is likely to narrow down and PL share (7.4% in 3QFY24) is likely to improve. Additionally, the domestic corporate book (33.8% share) may improve further with a strong underwriting process."

LKP has recommended buying for a target price of Rs 1,762. Also, Kotak Institutional Equities has recommended buying with a revised target price of Rs 1,750. This week, Morgan Stanley maintained overweight on the bank with a Neutral outlook, however, trimmed its target price to Rs 1,900 from earlier Rs 2,110.

After Morgan's revised target price, Bernstein's target price is highest in HDFC Bank to a staggering Rs 2,100. Bernstein does not expect HDFC Bank's growth to drop to ~10% unless the bank can be selective in the loan segments that it grows in, in which case the EPS impact from slower loan growth would be minimal. Berstein maintains an overweight on HDFC Bank stock, while factoring in loan growth marginally to ~15% in FY25E and FY26E.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.