Buy HDFC Bank, target Rs 2,820: Anand Rathi

HDFC Bank reported net interest income growth of 22.9 percent in its Q1-FY20 standalone results at Rs 1,32,943 million as against Rs 1,08,136 million in Q1-FY19, driven by asset growth and a core net interest margin of 4.3 percent. Provisions stayed a tad higher at Rs 26,137 million, up 38.3 percent QoQ. Earnings growth continues to stay healthy at 21 percent YoY to Rs 55,682 million.

Total advances at the end of Q1-FY20 came in at Rs 82,97,300 million, an increase of 17.1 percent over Q1-FY19. Domestic advances grew by 17.9 percent over Q1-FY19 comprising of domestic retail loans which grew by 16.5 percent and domestic wholesale loans which grew by 19.6 percent. The domestic loan mix between retail and wholesale was 54:46. Overseas advances constituted 3 percent of total advances.


Total deposits at the end of Q1-FY20 came in at Rs 95,45,540 million, an increase of 18.5 percent over Q1-FY19. CASA deposits grew at 12.8 percent with savings account deposits at Rs 25,33,380 million and current account deposits at Rs 12,56,630 million. Time deposits were at Rs 57,55,530 million, an increase of 22.5 percent over the previous year, resulting in CASA deposits comprising 39.7 percent of total deposits as at the end of Q1-FY20.


Provisions came in higher largely due to higher provisions for agri book & increased rate of provisions on unsecured book. The bank has also made contingent provisions of Rs 1650 million and Rs 860 million towards NBFC/HFCs, respectively. Overall asset quality marginally deteriorated with GNPA ratio at 1.4 percent, up 4 bps QoQ.

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The bank stated it has been trying to push for deposit mobilization and hence, has been steadily increasing deposits to support loan book growth. Adjusting for the cash management-related inflows which are outside of the deposit accounts and the long-term institutional funding, credit-deposit ratio comes down to 75 percent.

Considering the strong positioning, healthy balance sheet growth and superior asset quality& management, we believe the bank is well poised to deliver consistently with margin leadership & robust return ratios. We continue to remain positive on the company over medium to longer term perspective and maintain our buy rating on the stock with a target price of Rs 2,820 per share.

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