HDFC Bank shares rise 3%; stock adds Rs 23,352 crore to investor value

Shares of HDFC Bank Ltd rose over 3 per cent in Tuesday's trade as investors weighed the latest developments around the bank's leadership succession, along with a favourable court ruling in the Credit Suisse AT1 bonds matter.

The Bahrain High Civil Court has rejected all seven cases filed against HDFC Bank by investors in connection with the Credit Suisse AT1 bonds matter. The final two proceedings were rejected on September 9, following the dismissal of five similar cases during July and August.

HDFC Bank shares opened at Rs 722.90 on Tuesday, against the previous close of Rs 708. The stock touched a high of Rs 730.30, marking a gain of 3.25 per cent over its previous close. HDFC Bank's market capitalisation rose 2.14 per cent, or Rs 23,352.48 crore, in Tuesday's trade.

The cases involved allegations related to the purchase of Credit Suisse AT1 bonds through HDFC Bank. According to the bank, the Bahrain court rejected the allegations after concluding that the investors had not provided sufficient admissible evidence to substantiate their claims or establish that their losses were attributable to HDFC Bank.

Meanwhile, the focus remains on the appointment of HDFC Bank's next MD & CEO. The bank's board has submitted a list of two candidates to the Reserve Bank of India for consideration for a three-year tenure, with the key question being whether the regulator will approve an internal candidate or an external banker.

Kaizad Bharucha, Deputy MD & CEO, is widely seen as the internal candidate for the top position. Reports have also pointed to potential external candidates including Anup Bagchi of ICICI Prudential Life, HSBC's Hitender Dave and Citibank India's K Balasubramanian.

Foreign brokerage Nomura said an internal appointment could initially support the stock by removing uncertainty around succession and ensuring continuity. It also noted that Bharucha's familiarity with HDFC Bank and its businesses could make the transition smoother.

"However, a credible external candidate could offer a longer runway and a cleaner slate. In our view, this could be more significant for the stock over the medium term, as a new leader would have greater scope to reassess strategy, challenge existing practices and drive a strategic reset," Nomura said.

The brokerage said HDFC Bank has materially underperformed and believes a credible external appointment backed by a strong operating track record could become a catalyst for a re-rating, particularly if the new leadership comes with a clear roadmap for growth, deposits, margins and returns.

"The leadership transition remains the more important near-term stock catalyst. An internal appointment could provide initial relief by removing succession uncertainty and ensuring continuity. However, we believe a qualified external candidate with a strong banking track record could be more supportive of a sustained re-rating, given the potential for a strategic reset and a longer leadership runway," it said.

Nomura maintained its 'Buy' rating on HDFC Bank and valued the stock at 1.9 times its March 2028 book value per share. It arrived at a target price of Rs 950, with the bank's subsidiaries contributing Rs 105 per share.