IGI Logo

HDFC Bank reported good results with operating growth ex treasury gains of 15% yoy, while lower provisions of Rs.3,188 cr (-34% yoy), resulting in a net profit of Rs.9,196 cr (19% yoy growth) for Q1FY23.

Key Highlights of Q1FY23 Results

• On the P&L front, NII grew by 15%/3% yoy/qoq, highest in the last 5 quarters, to Rs.19,481 cr, while Net interest margin (NIM) improved marginally by 7 bps on qoq basis to 3.9%. We expect improvement in NIM going forward. Increase in yield on advances would be faster than the increase in cost of funds, as deposits would take more to reprice than the advances. Fees and commission income constituting 84% of other income was at Rs.5,360 cr and grew by 38% over the prior year, due to a low base in the last year. Retail constitutes approximately 92% of fees. Cost-toincome (C-I) ratio excl treasury for the quarter was at 38.6%. With stepped-up investments in the technology and retail segment continuing to pick up and going forward, the bank anticipates the spend levels to an increase, leading to increase in C-I ratio in the medium term. Trading and mark-to-market losses were Rs. 1,312 cr, primarily owing to a spike in benchmark bond yields witnessed during the quarter.

• Loan book grew by 22%/-2% yoy/qoq basis, with retail advances growing by 22% yoy and commercial and rural book growing at 30%. Excluding auto loans, which faced supply chain issues, the retail loan book grew by 25% yoy. In the wholesale segment, due to lower yields, the bank let go of assets aggregating from Rs.40,000 cr to Rs.50,000 cr. Despite that, the wholesale book grew 15.7% yoy. The credit card portfolio is seeing improvement in credit growth as spends are increasing and line utilization is improving. Deposits witnessed 19% yoy growth, with CASA deposits growing faster at 20% yoy. Low cost deposits increased by ~30bps yoy to 45.8% of the total deposits.

• Gross NPA witnessed an uptick with GNPA ratio at 1.28% as compared to 1.17% on qoq basis. Gross NPA includes a standard account of 18 basis points, as one of the other facility of the borrower is NPA. Annualized slippage ratio was at 2% for the quarter compared to 1.3% in 4QFY22 and 2.5% in 1QFY22. There were some oneoff slippages from the agri and corporate portfolio, excluding which the slippages for the quarter stood at ~1.5%. Specific loan loss provision is healthy and stands at 73%. The total annualized credit cost for the quarter was 91 basis points as compared to 167 basis points in the previous year and 96 basis points in the previous quarter. The restructuring under the RBI resolution framework for COVID19 as of June-end stands at 76 basis points. Management believes the asset quality trends to be better going forward, therefore credit costs is expected to be benign in the future.

Outlook and Valuation

HDFC Bank is one of the leading private sector bank having strong parentage and brand equity created over many years. Bank has been consistent in gaining market share and industry leading NIMs over many years. Going forward, with pick up in loan growth, healthy NIM and lower credit cost, henceforth, we expect HDFC Bank to report ROA/ROE of 2.0%/17.4%. We recommend ‘BUY’ with a target price of Rs.1854, with an investment horizon of 18-24 months.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.sushilfinance.com/Disclamier/disclaimer
Member : BSE/ NSE/ MSEI. SEBI Registration No.-INZ000165135.
 

Above views are of the author and not of the website kindly read disclaimer