HDFC Bank saw its shares fall up to 4.2% on Wednesday after the bank announced that the completion of its merger with HDFC Ltd will negatively impact its key financial metrics, including its margins and bad loan ratios. 

The $40 billion financial services behemoth provided the outlook at an analyst meeting held earlier on September 18. Following this, several brokerages reduced their target prices and lowered the stock rating, further contributing to the robust selling. 

The Analyst call highlighted potential pressure on net interest margins (NIM) over the next two to three quarters. Due to excess liquidity, NIM will be dragged down 25 basis points (bp) in the forecast for financial 2024 and 15-20bp in the FY25-26 forecast. 

Analysts expect the bank’s gross bad loan ratio to increase to 1.4% as of July 1 post-merger, from a standalone 1.2% in the June quarter. The accounting adjustments will lead to higher cost-to-income and a sharp rise in net performing assets (NPAs) in HDFC Ltd’s corporate loan book.

Shares of HDFC Bank were trading at Rs 1,563.15, 4.05% lower than the previous closing price on the National Stock Exchange (NSE). The stock was the top loser in the NSE Nifty 50.