The appointment of Anup Bagchi as the MD & CEO of HDFC Bank is seen as a strategically positive move and could remove the prolonged overhang on around management succession, analysts said.
On October 1, the Reserve Bank of India (RBI) approved the name of Anup Bagchi, an ICICI Bank veteran and current MD & CEO of ICICI Life Insurance, as the Managing Director & CEO of HDFC Bank for a three-year period starting October 27.
Analysts believe the appointment should help restore investor and customer confidence in the bank, given that Bagchi is a banking veteran with experience across diverse responsibilities within the ICICI Bank group.
Morgan Stanley said that the CEO succession issue had been overhang on HDFC Bank stock, and the latest announcement reduces this uncertainty. It noted that HDFC Bank shares have underperformed the BSE Bankex index by 19 percentage points on a year-to-date (YTD) basis.
It has an ‘Overweight' rating on HDFC Bank shares, with target price of Rs 1,025 apiece.
ALSO READ: Stock Market Today: All You Need To Know Before Going Into Trade On October 5
JP Morgan believes that the appointment of an external candidate as a CEO is a positive inflection point and the strategic reset could reduce stock overhang.
However, it said that HDFC Bank's Net Interest Income (NII) growth revival remains a key for rerating.
JP Morgan believes HDFC Bank shares trade at around 25% discount to ICICI Bank, and the current valuation looks attractive. It maintained an ‘Overweight' rating, with HDFC Bank share price target of Rs 990.
Goldman Sachs reiterated its ‘Buy' call on HDFC Bank shares, with a target price of Rs 861 apiece, highlighting that Bagchi's appointment removes leadership uncertainty, while his banking experience comforts investors.
Investor focus now shifts to turnaround and growth strategy. The brokerage expects HDFC Bank to see operating leverage benefits ahead, with core PPOP growth seen at 17% over FY27-FY29.
While loan growth concerns largely priced in, slower deposit growth remains key risk, Goldman Sachs said.
HDFC Bank stock trades at 11x FY28E EPS, 40% below historical average, it added. The brokerage firm sees current levels as attractive entry point.
Citi also sees Bagchi's appointment as strategically positive with re-rating potential, which resolves leadership overhang.
It said that the appointment reinforces governance reset after Rajiv Kumar's induction as Chairman. However, execution of strategy will be a key monitorable.
Senior management continuity, particularly Deputy MD Kaizad Bharucha, would be a key watch item.
ALSO READ: Stock Picks Today: IndiGo, Nykaa, ITC, Bajaj Finance, DMart And More On Brokerages' Radar
Citi has a ‘Buy' rating on HDFC Bank shares, with a target price of Rs 970 apiece.
Jefferies said the appointment provides clarity on management succession and strategic direction, while timely management reorganisation would strengthen execution and support re-rating.
It expects retail deposit growth pickup could support loan growth and sees opportunity to improve fee growth through cross-selling. However, it believes Bancassurance headwinds need to be managed.
Jefferies expects HDFC Bank to deliver better ROA if re-risking calibrated towards SME, gold and unsecured personal loans. The brokerage firm maintained a ‘Buy' call, with HDFC Bank share price target of Rs 880 apiece.
According to Avinash Singh, Deputy Head of Research at Emkay Global Financial Services Ltd, given the prolonged underperformance of HDFC Bank shares, the valuation has become attractive, and the stock should see a sustained re-rating as the new leadership delivers on key priorities and geopolitical uncertainty-led FPI outflows moderate or reverse.
The brokerage firm reiterated its ‘Buy' rating on HDFC Bank stock with a target price of Rs 1,225 apiece.
ALSO READ: Catch Stock Market Live Updates Here
Disclaimer: The views and opinions expressed by the investment advisers on NDTV Profit are of their own and not of NDTV Profit. NDTV Profit advises users to consult with their own financial or investment adviser before taking any investment decision.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.