MOSL: HDFC (Buy)-AUM growth continues to surprise-spreads stable QoQ

HDFC: AUM growth continues to surprise; spreads stable QoQ

(HDFC IN, Mkt Cap USD46.0b, CMP INR1957, TP INR2260, 16% Upside, Buy)

• HDFC Ltd. (HDFC) reported a steady quarter, with core PBT up 13% YoY to INR26.3b (3% miss). The quarter was marked by healthy AUM growth (+18% YoY/+4%QoQ) across the retail and corporate segments, a sharp decline in cost of funds (calculated), and stable asset quality.
• In the quarter, HDFC sold 9.5% stake in HDFC Standard Life Insurance resulting in a one-time gain of INR52.5b, against which it made voluntary one-off provisions of INR15.75b.
• Growth in the retail home loan segment was in line with past trends at 18% YoY, while that in corporate lending was ~21% YoY. Note that this is the third quarter of 20%+ YoY corporate loan growth, which has come after 3-4 successive years of ~10% growth. Individual disbursement growth stood at 27% YoY for 9MFY18 and 35% YoY for 3QFY18.
• Reported spreads/margins remained stable sequentially (9M Vs 1H) at 2.3%/3.9%.
• HDFC continues to surprise positively on the opex front (+12% YoY v/s our expectation of +14% YoY). Note that opex growth in the past 10 quarters has always been sub-13% (average growth of 8-9% YoY). Hence, C/I (ex-commission expenses) for the quarter was stable YoY at 7.6%.