EUR 120.00 For Business Accounts Only

MOSL: HDFC (Buy)-Business on track- share of retail loans increasing

HDFC: Business on track; share of retail loans increasing

(HDFC IN, Mkt Cap USD46.4b, CMP INR1919, TP INR2300, 20% Upside, Buy)

 

• HDFC reported PAT of INR21.1b in 3QFY19, 9% above our estimate of INR19.4b, led by NII beat, lower-than-expected opex and a lower tax rate.
• The company scaled back on the corporate lending business, while the retail lending business was largely unaffected. AUM grew 3% QoQ/15% YoY to INR4.4t, driven by growth of 18% YoY in retail lending and 8% YoY (slowest in past three years) in corporate lending.
• NII growth came in at a robust 26% YoY (v/s 15% AUM growth), driven by (a) stable spreads, (b) higher assignment income in the quarter and (c) lower leverage due to capital raise and warrant conversion.
• Reported spreads and margins were largely stable at 2.3% and 3.2%, respectively. Interestingly, calculated cost of funds remained unchanged on a sequential basis at 8.35%.
• Opex was under control (up just 1% QoQ), leading to a 9.8% C/I ratio.
• GNPL ratio increased 9bp QoQ to 1.22%, driven by ~30bp increase in the corporate GNPL ratio to 2.46%. A large corporate account slipped into NPL this quarter. HDFC continues to provide 40% on its GS3 loans.