India's HDFC Bank extends fall on disappointing Q1 loan book, deposit growth

BENGALURU/MUMBAI (Reuters) -Shares of India's top private lender HDFC Bank fell over 4% on Friday and were the top losers on the Nifty 50 index, a day after the bank reported a sequential decline in loans disbursed and a flat deposit growth in the first quarter.

The Mumbai-based lender merged with HDFC last July, adding a large pool of mortgage loans to its portfolio but a much smaller amount of deposits. This put it under pressure to increase the pace at which it raises deposits or slow loan growth.

By 5:46 GMT, shares HDFC Bank were set for their biggest one-day drop since June 4 when India's election results were announced. The stock had hit a record high earlier this week on hopes of a bigger weightage in a key MSCI index. In the April-June quarter, gross advances dipped 0.8% sequentially to 24.87 trillion rupees ($297.89 billion).

The drop in loan growth was driven by a 5% quarterly decline in corporate loans, Macquarie analyst Suresh Ganapathy said in a note, terming April-June as a "seasonally weak quarter" for the bank.

The bank's deposits stood at 23.79 trillion rupees in the June quarter, nearly flat from the previous three months, which Jefferies said was "slightly disappointing."

Low-cost current and savings account deposits fell 5% sequentially to 8.64 trillion rupees in the quarter.

The bank's loan-to-deposit ratio (LDR), a metric to assess whether a lender has enough deposits to fund loan growth, was flat at 105% compared with the prior quarter.

These are provisional numbers and the bank is due to announce its financial results on June 20.

Macquarie's Ganapathy expects HDFC Bank's net interest margins - a key gauge of profitability - to "remain broadly unaffected" in April-June.

Macquarie has an Outperform rating on the stock with a target price of 1,825 rupees apiece.

($1 = 83.4810 Indian rupees)

(Reporting by Sethuraman NR in Bengaluru and Siddhi Nayak in Mumbai; Editing by Nivedita Bhattacharjee)