Modest business growth; CASA mix moderates to 46%
HDFCB released its quarterly update, highlighting key business numbers for 1QFY23. Following are the takeaways:
* Total advances picked up and grew at a healthy pace of 21.5% YoY. Sequentially, advances grew 1.9% (v/s 8.6% in 4QFY22) to INR13.9t. As per the bank’s internal classification, Retail loans grew 21.5% YoY and 5% QoQ. Commercial and Rural Banking continues to remain strong (up 29% YoY and 3% QoQ). Corporate and the other Wholesale book too picked up and grew 15.5% YoY (flat QoQ).
* The bank’s deposit base rose 19.3% YoY and 2.9% QoQ to INR16.1t. CASA deposits grew 20% YoY, but fell 2.2% QoQ. The CASA mix declined by 220bp QoQ to 46%. Retail/Wholesale deposits grew 18.5%/22.5% YoY and 3.5%/0.5% QoQ.
* The bank purchased loans aggregating INR95.3b in 1QFY23, through the direct assignment route, under a Home loan arrangement with HDFC.
Valuation and view:
HDFCB reported a robust YoY loan growth, but the same was below trend on a sequential basis. A healthy revival was witnessed in Retail loans, while Commercial Banking and Corporate segment saw strong traction and will likely support growth in PPOP. We expect the margin trajectory to recover gradually over FY23, while the uptick in Retail loan growth and Unsecured products will be supportive of fee income. The trend in Retail deposits softened, with the bank witnessing a sequential decline in its CASA ratio to 46%. We maintain our Buy rating with a TP of INR1,850 per share (premised on 3.1x FY24E ABV for the core bank and INR104 from its subsidiaries).
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