JPMorgan has retained its Neutral rating on HDFC Bank, cutting the target price to Rs 1750, reflecting a limited 4% upside. The bank reported Q2 FY25 PAT of Rs 168 billion, up 5% year-on-year, which was 3% ahead of estimates, supported by the reversal of Alternative Investment Fund (AIF) related provisions.
Core net income, adjusted for the reversal, was in line with estimates. Net Interest Margins (NIM) remained flat quarter-on-quarter as improvements in the loan and liability mix were offset by higher liquidity, maintained in light of new regulations. Net Interest Income (NII) grew 10% year-on-year, while Core PPOP increased by 13% year-on-year due to fee recovery and moderate expense growth.
While asset quality remained stable with net slippages contained at 0.7%, JPMorgan expressed caution over the bank’s growth prospects given the uncertain credit environment and slower loan growth. The current credit conditions limit the potential for a significant re-rating.
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