HDFC Bank Stock Recommendation: Citi Advises ‘Buy’ with 44% Upside Potential Due to Strong Franchise

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Citi analysts have highlighted that HDFC Bank is actively cultivating a sustainable franchise, with a strong emphasis on balanced and profitable growth. The global brokerage firm, Citi, has issued a ‘buy’ recommendation for HDFC Bank, setting a target price of Rs 2,050 per share, indicating a potential upside of more than 44% from its recent closing price of Rs 1,417. The analysts at Citi are optimistic about the bank’s resilient and enduring franchise, which is expected to drive profitable growth in the foreseeable future. Despite a decline of over 17% in the stock value of India’s largest private sector lender this year, in contrast to a 0.6% increase in the benchmark Sensex, Citi remains bullish on HDFC Bank’s long-term prospects.

According to analysts at Citi, HDFC Bank is focused on upholding a robust incremental liquidity deposit ratio (LDR) and liquidity coverage ratio (LCR). The brokerage firm stated, “To counteract rising funding expenses, the bank intends to adjust lending rates accordingly. Its objective is to sustain net interest margin (NIM) and return on assets (RoA) within the targeted parameters.”

Furthermore, analysts noted that recent developments at Paytm have fueled optimism within the company regarding potential opportunities. They suggested that HDFC Bank can capitalize on the group’s capabilities to enhance its market share in third-party distribution channels.

Previously, Paytm collaborated with Axis Bank to facilitate merchant payment settlements following the Reserve Bank of India’s (RBI) extension of the deadline for Paytm Payments Bank account holders, including both customers and merchants, to transfer their assets and seek alternative banking options until March 15.

Additionally, analysts at Citi remarked that HDB Financial Services remains on schedule to meet its listing timelines as originally planned.

Furthermore, analysts at Morgan Stanley recently issued an ‘overweight’ rating on HDFC Bank, setting a target price of Rs 2,110 per share. This optimistic assessment followed management’s announcement of stable and robust double-digit year-on-year (YoY) growth in its home loan business post-merger until December 31, 2023.

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