HDFC Bank (HDB) Fell on Weak Margin and Slow Deposit Growth

Polen Capital, an investment management company, released its “Polen Emerging Markets Growth Strategy” first quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund returned 1.48% gross and 1.25% net of fees in the quarter compared to 2.37% for the MSCI Emerging Markets Index. Emerging market securities rose in the quarter, carrying over the upward trend from the fourth quarter of 2023. Despite the strong returns of the asset class over the previous six months, emerging equities continued to underperform developed markets. In addition, please check the fund’s top five holdings to know its best picks in 2024.

Polen Emerging Markets Growth Strategy highlighted stocks like HDFC Bank Limited (NYSE:HDB), in the first quarter 2024 investor letter. HDFC Bank Limited (NYSE:HDB) is a banking and financial services provider. HDFC Bank Limited's (NYSE:HDB) one-month return was -1.00%, and its shares lost 14.47% of their value over the last 52 weeks. On June 4, 2024, HDFC Bank Limited (NYSE:HDB) stock closed at $55.51 per share with a market capitalization of $140.702 billion.

Polen Emerging Markets Growth Strategy stated the following regarding HDFC Bank Limited (NYSE:HDB) in its first quarter 2024 investor letter:

"HDFC Bank Limited (NYSE:HDB) shares declined early in the quarter as India's largest private lender reported weak margins for a second consecutive quarter and slowing deposit growth. We remain positive on long- term opportunities. The bank has and should continue to benefit from the strong growth of the Indian economy over the past two decades while taking a significant share from its less well-run public-sector competitors. We expect these trends to remain in place for at least the next five years.

More recently, the company has stagnated somewhat after its merger with its parent company, which weighed on margins and returns on capital. We expect HDFC Bank will integrate its parent's operations and replace its higher-cost funds with lower- cost deposits in the coming years. Meanwhile, valuations trade at an attractive level of 18x forward earnings, a level not much above its 2008 lows and a stark contrast to many lower-quality companies we observe elsewhere in India."

A business owner tallying their profits in the back office of a local banking branch.

HDFC Bank Limited (NYSE:HDB) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 44 hedge fund portfolios held HDFC Bank Limited (NYSE:HDB) at the end of the first quarter which was 41 in the previous quarter. HDFC Bank Limited’s (NYSE:HDB) net revenues for the quarter were at INR 396 billion, increased by 25.8% over prior year. While we acknowledge the potential of HDFC Bank Limited (NYSE:HDB) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we discussed HDFC Bank Limited (NYSE:HDB) and shared Baron Emerging Markets Fund's views on the company. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.