Recommendation: buy
Target price: 1,950 rupees
HDFC Bank reported healthy loan growth for the quarter ended September 30, 2022. This growth was led by strength in CRB and wholesale loans. The bank’s loan book grew 23.5% compared to the same quarter last year. Deposit growth continued at 19% compared to the same quarter last year, but the CASA rate fell 40 basis points sequentially to 45.4%.
HDFC Bank’s net interest income (NII) could grow 14% compared to the same quarter last year and 3%, respectively. Growth in non-interest income could lag that at the National Insurance Institute, resulting in total income growth of 10% year-over-year (7% growth qoq).
Net interest margin is expected to improve sequentially with the previous quarter, but higher wholesale growth and lower checking and savings accounts could limit the improvement. Asset quality is expected to remain benign (total NPA estimated at 1.3% vs. 1.4% in the last year quarter).
Provisions are likely to decline over the course of last year’s quarter and sequentially. Thus, the bank’s earnings after tax or PAT can grow at a higher pace compared to the baseline.
Important management insights to watch out for:
- Demand for credit across major sectors
- Asset Quality Trends
- Updates on integration with HDFC
|
rupee. Billion |
September 2022 estimates |
QoQ change |
Annual change |
| net interest income | 201.0 | 3% | 14% |
| Gross income | 277.1 | 7% | 10% |
| Advance operating profit savings | 166.5 | 8% | 5% |
| provisions | 28.0 | (12)% | (29)% |
| Profit after tax | 104.5 | 14% | 18% |
| loans | 14800 | 6% | 23% |
| deposit | 16,735 | 4% | 19% |
Source: Inc., IIFL Research