MOSL: HDFC BANK (Buy)-Robust PPoP growth-operating leverage will continue to aid earnings
​HDFC Bank: Robust PPoP growth; operating leverage will continue to aid earnings
(HDFCB IN, Mkt Cap USD73.5b, CMP INR1865, TP INR2150, 15% Upside, Buy)
- HDFC Bank (HDFCB) reported strong 30% YoY growth in PPoP (~4% beat), led by steady revenue growth and controlled opex. However, higher provisions (HDFCB made contingent provisions toward one large account that underwent 5:25 restructuring in Feb-16) resulted in 20% YoY growth in PAT.
- Loans grew 22% YoY/4% QoQ to INR6.05t. Incremental growth in the quarter was driven by retail loans (+29% YoY/7% QoQ), resulting in an increase in its loan mix share to 55%. Business banking, personal loans and credit card continue to report strong growth within the retail segment.
- Fee income growth stood at 24% YoY, which coupled with strong FX income and treasury gains of INR3.84b, resulted in 24% YoY growth in other income.
- CASA deposits held flat on a sequential basis, while term deposits grew 4.7% QoQ. CASA ratio thus moderated 110bp QoQ to 42.9% (48% in 4QFY17 - after demonetization).
- Asset quality remained largely stable; however, the bank made contingent provisions of INR4b toward an account that underwent restructuring in Feb-16 and remains standard in the books. Provisioning coverage ratio thus improved 119bp QoQ to 66.3%.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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