Recommendation: Buy
Target price: Rs1,950
HDFC Bank posted healthy loan growth during the quarter ended September 30, 2022. This was led by strength in CRB and wholesale loans. The Bank’s loan book grew 23.5% over the year-ago quarter. Deposit growth sustained at 19% over the year-ago quarter, but CASA ratio decreased ~40 basis points sequentially to 45.4%.
HDFC Bank’s Net Interest Income (NII) could grow 14% over the year-ago quarter and 3% sequentially. Growth in non-interest income could lag that in NII, leading to a 10% year-on-year growth in total income (7% growth sequentially).
Net Interest Margin should improve sequentially, however higher wholesale growth and lower CASA could limit the improvement. Asset quality is expected to remain benign (Gross NPA ratio is estimated at 1.3% versus 1.4% in the year-ago quarter).
Provisions are likely to decline both over the year-ago quarter and sequentially. Consequently, the Bank’s Profit After Tax or PAT could grow at a higher pace as compared to the topline.
Important management insights to watch out for:
- Credit demand across key segments
- Asset quality trends
- Updates on the merger with HDFC
| Rs. Billion | September 2022 estimates | QoQ change | YoY change |
| Net Interest Income | 201.0 | 3% | 14% |
| Total Income | 277.1 | 7% | 10% |
| Pre-Provisioning Operating Profit | 166.5 | 8% | 5% |
| Provisions | 28.0 | (12)% | (29)% |
| Profit After Tax | 104.5 | 14% | 18% |
| Loans | 14,800 | 6% | 23% |
| Deposits | 16,735 | 4% | 19% |
Q2FY23 Preview: HDFC Bank: NII seen at Rs201.0 billion, PAT at Rs104.5 billion - Indiainfoline
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