Q2FY20 results highlights
Valuation and view
HDFC Bank is the best risk-off trade in the financial sector in the current environment. Despite slower asset growth and higher precautionary provisions, HDFC Bank remains the best investment option given its strong risk management, cautious provisioning, stronger-than-sector growth, high capital adequacy, digital leadership and wide distribution. We reiterate Outperformer. Mgmt explained that early signs of revival are visible across retail segments which we believe would lead to higher growth / better asset quality in the quarters to come. Also as the bank lightens its excess liquidity buffer, NIMs could expand leading to higher PPOP growth. Mgmt has clarified that all collateral / security enchased by them with respect to stress borrowers is legal and based on existing rules. The bank’s NBFC subsidiary, HDB Financials, reported weak asset quality as it aligned its NPL recognition and provisioning policy to HDFC Bank’s. After the alignment, HDB’s policies are stricter than most other NBFCs.
HDFC Bank is a commercial banking group based in India. Co. is engaged in providing banking and financial services. Co.'s operations are organized along four segments: Treasury, which includes its investment operations; Retail Banking, which serves retail customers with deposit products, loans and other services through a branch network and other delivery channels; Wholesale Banking, which provides loans, non-fund facilities and transaction services to corporations, public sector units, government bodies, and medium scale enterprises; and Other Banking Business, which includes para banking activities such as credit cards and debit cards.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
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