HDFC Bank Ltd. share price target

deciding to merge into HDFC Bank and the transaction would take ~18 months to complete. The rationale of the merger is that regulatory arbitrage between banks and NBFCs has been reducing while the time was opportune owing to a softer interest rate environment coupled with lower liquidity requirements. As at Dec'21, the total loan size of the merged entity would be ~Rs18trn with the share of mortgages expected to increase from 11% to 33%. Since a chunk of HDFC Ltd.'s customers do not have a banking relationship, this would provide tremendous cross-sell opportunities. While the merger...

Automated growth trajectory

Interaction with senior management of HDFC Bank suggests the bank is well geared to sustain high-teen growth in loans and advances. Visibility continues to be high on its consistent earnings delivery and >2% RoA / >18% RoE for FY23E/FY24E. Nonetheless, the stock has corrected >10% in past one year and underperformed Nifty by ~20% and Bank Nifty by ~7%. It currently trades at <3x FY23E BV at ~2SD discount to 5-year average valuation.

Retail loan growth revives; expect strong traction to sustain HDFCB exhibited robust traction in corporate and commercial banking segments until FY21, which offset the softness in retail lending. However, the bank has witnessed a healthy pick-up in retail loans recently, which grew at an average of 5% QoQ over the past two quarters. The recent growth was led by the unsecured business, as personal loans and credit card book rose 11%/16% over similar period while home loans grew 9.1%. The growth in auto financing business continued to remain tepid due to softer trends in passenger vehicle financing while the twowheeler segment continued to report sequential decline. We expect retail growth...

HDFC Bank was incorporated in August 1994. It provides corporate banking and custodial services and is also involved in treasury and capital markets. In addition, it offers project advisory services and capital market products,...

Bank remains reasonably stable during turbulence

We maintain a BUY on the stock with a revised target price of Rs 1985/share (SOTP basis core book at 3.5x FY24E and Rs 70 Subsidiary Value).

HDFC Bank reported a strong trend on asset quality and operating performance in 3QFY22. The absolute GNPA amount decreased 2% sequentially, which resulted in improvement in GNPA ratio to 1.26% v/s 1.35% in the previous quarter. The reported GNPA is well below the historical trend...