EUR 120.00 For Business Accounts Only

MOSL: HDFC BANK (Buy)-Strong operating performance continues-margin improves further

HDFC BANK: Strong operating performance continues; margin improves further

(HDFCB IN, Mkt Cap USD89.7b, CMP INR2290, TP INR2650, 16% Upside, Buy)

 

• HDFCB’s PAT increased 22.6% YoY to INR58.9b (in-line) in 4QFY19 on account of healthy loan growth, improved margins and lower provisions. NII grew 23% YoY to INR130.9b (in-line), while the margin expanded 10bp QoQ/YoY to 4.4%.
• FY19 performance: NII/ PPoP/PAT grew by 20%/22%/20% to INR482b/INR397b/INR210b. The C/I and cost-to-core income ratios improved 133bp and 183bp to 39.7% and 39.9%, respectively.
• Core fee income grew by just 11% YoY to INR36.9b, mainly due to a sharp decline in mutual fund distribution fees and a slowdown in disbursements in the unsecured book .Treasury gain of INR2.3b in the quarter – as against INR0.22b in the year-ago period – led to an acceleration in other income growth to 15% YoY to INR48.7b.
• Opex grew ~18% YoY/6% QoQ (in-line), resulting in PPoP growth of ~23% YoY (20% YoY growth in core PPoP). Cost-income ratio rose 122bp QoQ to 39.6%, while the cost-to-core income ratio was up 67bp QoQ to 40.1%.
• Loans grew 24.5% YoY (+5% QoQ) to INR8.2t, driven by the corporate segment (7.8%/31.2% QoQ/YoY), while retail segment growth slowed down to 2.5%/19% QoQ/YoY. Deposits growth of 17% YoY (+8.3% QoQ) was largely supported by 19% YoY growth in term deposits, while CASA grew at 14% YoY (+13% QoQ). CASA mix, thus, improved to 42.4% from 40.7% in 3QFY19.
• Slippages stood at INR35.8b (1.8% annualized), leading to ~3% QoQ increase in GNPA, while NNPA declined 3% QoQ to INR32.1b. GNPA/NNPA ratios declined 2bp/3bp QoQ to 1.36%/0.39%. Coverage ratio, thus, improved to 71.4% (+164bp QoQ).