HDFC Bank Ltd. share price target

We maintain a BUY on the stock with a target price of Rs 1770/share (SOTP basis core book at 3.6x FY23Eand Rs 48 Subsidiary Value).

As per media reports, the Reserve Bank of India (RBI) has partially lifted restrictions placed on HDFCB in Dec'20, and has allowed the bank to source new Credit Cards. However, the restrictions on new digital application launches will continue. The RBI's move addresses the key overhang as HDFCB is the largest Credit Card issuer in the country, and this segment is key to the bank's overall profitability. In recent quarters, the bank reported a moderation in fee income/NII, affected by...

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,...

HDFCB's earnings profile of Rs77.3bn was lower than estimates (PLe: Rs79.8bn) led by a much weaker than expected NII growth of 9% YoY despite a loan growth of 14% YoY. NII profile has remained weaker than loan growth for some time now but unfavorable mix on high liquidity & non-retail focus is reflecting much higher. In our view, HDFCB will continue to face near term setbacks with difficult operating environment leading to weaker cross cycle NII of 12% YoY, higher slippages of 200bps and volatile earnings of 17-18%. Although, bank has a strong balance sheet with PCR of 67-70% and ability to...

Net interest margin for the bank came in at 4.1 per cent. This was only the third time since the beginning of FY17 that the bank's NIM came in this low. Total advances rose 14.4% y-o-y to Rs 11.5 lakh crore, of which retail loans were up 9.3% y-o-y to Rs 4.58 lakh crore. Similarly, commercial and rural banking loans were up 25% from a year ago to Rs 3.86 lakh crore. The bank also said wholesale loans were up 10% y-o-y to Rs 3.14 lakh crore. Total deposits of the bank grew 13.2% y-o-y to Rs 13.4 lakh crore. CASA deposits grew by 28.1% y-o-y with savings...

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We maintain BUY with a revised target price of Rs 1,720 derived using the SOTP method (core bank at 3.5xFY23 ABV + Subsidiaries value Rs 48/-).

HDFC Bank's asset quality deteriorated due to second Covid-19 wave as GNPA stood at 1.47% vs 1.36% YoY (1.32% QoQ) while NNPA at 0.5% vs 0.3% YoY (0.4% QoQ). Annualized slippage ratio increased to 2.54% vs 1.2% YoY (1.66% QoQ). Restructured assets stood at 80bps of advances as of Q1FY22; led by retail portfolio. However, 2/3rd of this constitutes unsecured assets. Collections were impacted in April and May however picked up in June. Advances growth remains stable at 14.4% YoY vs 14.0% YoY in Q4FY21 led by wholesale loans (10.2% growth) and retail loan growth of 9.3%. Deposits growth slowdown to 13% YoY (16% YoY in Q4FY21) while, CASA growth remain robust at 28%. NII grew slowly by 9%...

HDFCB reported an in line performance, though margin fell by 10bp QoQ on higher interest reversals, unfavorable asset mix, and lower revolving balances on Credit Cards. The bank further shored up its contingent provisions by INR6b to ~INR66b (~0.6% of loans), though this dragged net earnings growth to 16% YoY the lowest in the past many years. Advances growth stood at 14% YoY, led by healthy trends in the Commercial and Rural Banking portfolio, while Retail growth was muted due to a sharp (7% QoQ) decline in the Credit Cards portfolio, which was...

HDFC Bank reported a stable trend on asset quality and decent operating performance in 1QFY22. The absolute GNPA amount increased 13.3% sequentially, which resulted in deterioration in GNPA ratio to 1.47% v/s 1.32% in the previous quarter. The reported GNPA is well above the historical...