EUR 120.00 For Business Accounts Only

MOSL: HDFC BANK (Buy)-Earnings/PPOP in line; asset quality robust

HDFC BANK: Earnings/PPOP in line; asset quality robust

(HDFCB IN, Mkt Cap USD124b, CMP INR1686, TP INR2000, 19% Upside, Buy)

 

Restructuring increased to 1.5% of loans; contingent provision provides comfort

• HDFCB reported an inline quarter with NII/PPoP growth of 12%/14% YoY and PAT growth of 18% YoY to INR88.3b (inline). Profitability came in strong despite creating an additional contingent provision of INR12b, thus taking the total buffer to ~INR78b (~0.65% of loans).
• The bank witnessed a healthy pickup in business momentum as deposits / loans were up 4.5% QoQ each. Retail segment grew ~13% YoY while Commercial and Rural Banking grew robustly at 27.6% YoY. CASA deposits grew 29% YoY and the ratio now stands at 46.8% (+130bp QoQ).
• On the asset quality front, GNPA/NNPA ratio improved by 12bp/8bp QoQ to 1.35%/0.4%, with slippages moderating to INR53b (1.8% of loans). On the other hand, the restructured book increased to 1.5% of loans (v/s 0.8% in 1QFY22). The management said the net impact of the restructured book on NPAs is likely to be 10-20bp. Higher provision coverage, along with a contingent provision buffer, provides comfort on asset quality.
• Our estimates remain unchanged at 20% PAT CAGR over FY21-24E, with RoA/RoE at 2.1%/18.3% for FY24E. The stock trades at 3.5x FY23E P/B and 21x FY23E P/E. We maintain our Buy rating.