Uncertainty Or Clarity? Here's what analysts tracking HDFC Bank say post the recent developments

Analysts who have coverage on HDFC Bank Ltd. are divided over the recent turn of events, where MD & CEO Sashidhar Jagdishan announced that he will not be seeking reappointment once his current tenure ends on October 26 this year.

Despite the divergent views, majority of the analysts having coverage on HDFC Bank have continued to maintain a "buy" rating on the stocks.

Here's what the analysts tracking India's largest private lender had to say:

Macquarie

The brokerage has an "outperform" rating on the stock with a price target of ₹1,150.

Macquarie wrote in its note that the timing of Jagdishan's departure adds a fresh layer of uncertainty when investor confidence in HDFC Bank is already fragile and the post-merger balance-sheet recalibration remains incomplete.

It further added that with the board now fast-tracking the appointment of Jagdishan's successor, they have a relatively narrow window to do the same.

JPMorgan

The brokerage is also "overweight" on HDFC Bank with a price target of ₹990.

According to the brokerage, the event could weigh on the share price in the short-term, but an expedited and timely appointment of a new CEO could help reduce the overhang of an uncertainty.

JPMorgan also believes that HDFC Bank's valuations already factor in a lot with scope for further de-rating being "rather limited."

Nomura

The brokerage expects stock to remain rangebound till clarity emerges on the next CEO and mandate. However, it believes that a credible successor to Jagdishan could become a meaningful re-rating catalyst for the lender.

"While this removes immediate reappointment uncertainty, leadership overhang now shifts to question of who succeeds him," the brokerage said.

Nomura has a "buy" rating on HDFC Bank with a price target of ₹950.

Bernstein

Bernstein too has an "outperform" rating on HDFC Bank with a price target of ₹1,150.

The brokerage said that while this extends the near-term uncertainty over the CEO succession, it views it as a net positive.

This move also rules out a much-feared scenario of a short, RBI-restricted term for Jagdishan, thereby opening up a natural opportunity for the incoming leadership to reset the bank's narrative, Bernstein said.

Kotak Institutional Equities

Kotak's "buy" rating on HDFC Bank comes with a price target of ₹1,050.

The brokerage said that while the merger with HDFC has strengthened the franchise overall, the key operating metrics for the lender remain below their best-in-class peers.

It believes that the new CEO must combine strong execution capabilities with a credible roadmap to improve margins and profitability.

"HDFC Bank's fundamentals remain sound, although uncertainty around the leadership transition is likely to keep valuation multiples below historical levels in the near-term," the note said.

Morgan Stanley

The brokerage remains "overweight" on HDFC Bank with a price target of ₹1,025.

A timely conclusion of the CEO appointment overhang will be key for a return of investors focus on fundamentals, the brokerage said.

HDFC Bank's fundamentals continue to gradually move in the right direction and while there are risks, the stock offers deep value, both relative to fundamentals and history, Morgan Stanley said.