HDFC Bank shares end 3% higher after RBI lifts ban: Outlook on shares

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HDFC Bank outlook

HDFC Bank's shares ended 3% higher after the RBI lifted all curbs. The RBI had earlier placed certain business restrictions after a series of technical lapses on the bank. We take a look at the development in detail, and the outlook going forward. 

Shares get a boost

HDFC Bank shares have been under pressure from the start of the year. From Rs 1550 per share in January, the share price made its 52-week low last week when it touched Rs 1292 per share. Finally, there is positive news for HDFC Bank and the shareholders. 

Timeline of events

  • The Reserve Bank of India (RBI) had asked HDFC Bank in December 2020 to stop all launches of its upcoming digital business generating activities and sourcing of new credit cards to customers. The reason was the repeated outages at its data centre which impacted operations.
  • In August 2021, the RBI partially lifted a ban on HDFC Bank to resume issuing new credit cards.
  • The RBI has now lifted restrictions on the new digital business-generating activities under its Digital 2.0 program.
  • Post the ban lift, the bank said it is fully committed to ensuring continued adherence to the highest standards of compliance with RBI recommendations.
  • It added, it has utilized this time to draw up short, medium, and long-term plans to meet the evolving digital requirements of their customers, and they will roll out these initiatives in the days to come. 

Brokerage radar

Post the ban-lift, the HDFC Bank share closed 3.25% higher on Monday to Rs 1,442.25 per share. Analysts point out that the bank is set to gain market share across most products including credit cards where they had lost market share in the last 12 months. Margin and profitability are likely to improve further going ahead. Here’s what various research houses have to say. 

Nomura: The research house has maintained a 'buy' call on the shares with a target price of Rs 1,955. The global brokerage firm noted that after this lifting on curbs, the negative sentiment from a supervisory oversight ought to finally dissipate. Over the longer term, the digital acquisition of customer and wallet share will improve profitability of the bank.

Morgan Stanley has maintained an 'OVERWEIGHT' rating for HDFC Bank with a target price of Rs 2,050 per share. Morgan Stanley expects new digital initiatives from HDFC Bank over the next few quarters. 

Jefferies said that the lift on restrictions on HDFC Bank would help push the launch of new platforms such as payments hub, customer experience hub, neo-bank vertical and ecosystem platforms. Even business as usual initiatives would get simpler with this clarity from the RBI. Jefferies has a target price of Rs 2,160 on the shares.