14 Mar , 2022 By : Kanchan Joshi
Shares of HDFC Bank surged more than 2% to Rs1,430 apiece on the BSE in Monday's opening deals as the Reserve Bank of India (RBI) has lifted all restrictions on HDFC Bank, permitting it to launch new digital initiatives.
In December 2020, it had imposed restrictions on HDFC Bank on issuing new credit cards and introducing new digital initiatives due to concerns over recurring IT-system outages. The restriction on issuance of credit cards was lifted in August 21, helping the bank regain share.
This would help push the launch of new platforms such as Payments-Hub, Customer-Experience Hub, Neo-bank vertical & ecosystem platforms. Even BAU initiatives would get simpler with this clarity from RBI, as per Jefferies.
“While the macro & geopolitical headwinds are important to watch, bank-specific issues are being sorted out. Now the embargoes are behind & loan growth has picked up; from a financial performance perspective, uptick in NII growth should be key to rerating. HDFC Bank is among our top picks in the sector, and we maintain Buy with price target of Rs2,160," Jefferies said in a note.
The RBI action came after the bank's customers faced a number of incidents of outages in internet banking, mobile banking, and payment utilities over the past two years.
Analysts at Ambit were negative on HDFC Bank since July 2020 on concerns around lower NII growth, pressure on fee income due to RBI ban on credit cards, higher asset quality deterioration vs large peers during Covid, IT and HR issues and premium valuations.
"With RBI lifting ban and bank fostering new co-branded partnerships, market share in credit cards should stabilize. Industry cheque bounce data and credit card overdue trends indicate improving asset quality trends for HDFC Bank. Given current comfortable valuation, strong franchise and moderating concerns, we turn positive," the note stated. Ambit has Buy rating on the bank stock with revised target price of Rs1,650 ( Rs1,551 earlier).
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