Buy HDFC Bank Ltd For Target Rs.1,885 - Yes Securities
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Slippages somewhat elevated due to agri and restructured book slippages
Result Highlights
* Asset quality: Annualized gross slippage ratio for 1QFY23 was 2.0% (Rs 72bn), with recoveries and upgrades amounting to Rs 30bn
* Margin picture: NIM at 4.0% was flat QoQ, as calculated yield on advances and cost of funds have moved similarly
* Asset growth: Advances grew 2.0%/21.5% QoQ/YoY, sequentially driven by Retail and Commercial and Rural (Ex. Agri loan) segments
* Opex control: Total opex rose 3.4%/28.7% QoQ/YoY, employee exp. grew 11.3%/26.6% QoQ/YoY and other exp. de-grew/grew -0.1%/29.8% QoQ/YoY
* Fee income: Fees and commissions fell/rose -4.8%/38% QoQ/YoY, sequentially lower due to 1QFY23 being a seasonally weaker quarter
Our view –
Slippages somewhat elevated due to agri and restructured book slippages
Slippages were somewhat elevated on the back of agri and restructured book slippages: While non-annualised slippage ratio was 50 bps for the quarter, the contribution of agri slippages and restructured book to this was 12 bps and 10 bps, respectively. Restructured book amounted to Rs 107.5 bn or 76 bps of advances. If nonrestructured exposure of borrowers under restructuring is included, then the same totals to 89 bps.
Management commentary pointed to a turnaround in the share of retail loans finally starting to take root:
Overall loan growth was 21.6% YoY but excluding the impact of sell-down (of IBPC/BRDS), it was 22.5% YoY. Overall retail loan growth was 21.7% YoY but excluding auto and related loans, which remain impacted by supply chain issues, the retail loan growth was 25% YoY. Management stated that the bank had been waiting for an opportunity to return to retail lending and that the share of retail in overall loan book can now rise faster than the pace at which it declined. Corporate loan growth was 15.7% since the bank let go of wholesale assets worth about Rs 500bn as other banks took them away with lower rates after key interest rate hikes by the RBI. The bank will not turn down corporate loan opportunities merely because they are NIM dilutive as the real test is whether they are return ratio dilutive.
We reiterate BUY rating on HDFCB with a revised price target of Rs 1885:
We value the standalone bank at 2.8x FY24 P/BV for an FY23E/24E/25E RoE profile of 14.1/14.4/15.3%. We assign a value of Rs 226 per share to the subsidiaries, on SOTP.
To Read Complete Report & Disclaimer Click Here
Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632
Above views are of the author and not of the website kindly read disclaimer
