HDFC Bank – CASA Focus + Super Profits + Premium Customers & Valuations
July 20, 2011
HDFC Bank (HDFCB) has matched its historical run-rate (Y-o-Y) of 30% plus. Net profit grew 33% yoy driven by strong loan growth of 30% yoy and 10% qoq, stable sequential NIMs despite a
rapid rise in deposit rates, and robust asset quality.
NII grew by a moderate 18.6% YoY to Rs28.5bn led by a modest but healthy credit growth (20% YoY and 9.7% QoQ) while NIM contracted ~25bps QoQ. In addition, the 350 bps QoQ contraction in CASA ratio added to NIM pressure.
Fee growth was 16% y/y, cost income ratio remained flattish at 49% despite 125 new branches opened. NPL ratio remained flat. Excluding one-time 3G loans of Rs115bn disbursed in June 2010, loan growth remained strong at 30% yoy and 10% qoq in 1Q FY12. Both corporate and retail loans grew strongly. Retail loans grew 5% qoq and 29% yoy. Non retail loans grew 32% yoy and 15% qoq. The bank acquired market share in retail loans especially in cars from SBI and in CVs from foreign banks.
HDFC Bank FY 2012 EPS Expectations and Stock Target Price
JP Morgan – Rs 21.52 with a target price of Rs 560
Citi – Rs 21.54 with a target price of Rs 540
Standard Chartered – Rs 21 with a target price of Rs 525
UBS – Rs 21.5 and 12 month target of Rs 525
HSBC – Rs 21.2 and a target of Rs 598 [ Very Bullish, in our view]
Kotak – Rs 22 and a 12 month target of Rs 560
Finally, HDFC Bank will cross USD 1 Bn in profits this Year. Also note that valuations for HDFC Bank are at peak levels compared to its historical valuation band. The valuation premium over its peers, i.e. ICICI Bank and Axis Bank are at peak levels and has increased over last 3-6 months. This is an ANY TIME BUY & HOLD for Long Term and a Must BUY Stock on Correction from our Portfolio Managers.