Jul 17, 2012, 03.07 PM | Source: Moneycontrol.com
Ventura is bullish on HDFC Bank and has recommended accumulate rating on the stock in its July 16, 2012 research report.
, Ventura |
“HDFC Bank’s advances have once again grown steadily by 21.6% yoy to Rs.2,13,300 crore with retail loans growing 33% yoy to Rs. 1,11,900 crore, while corporate loans grew by 10.7% yoy (15% qoq) to Rs 1,01,500 crore. The corporate loan book has looked up after many quarters of muted growth and the revenue share of this segment has increased by 240 bps to 47.6%. Growth in the deposits was exemplary at 22% (with deposits rising to Rs 2,57, 500 crore) with strong growth in term deposits (29% yoy to Rs 1,39,200 crore) leading to a 244 bps dip in CASA to 46.0% (although CASA was up 14.2% incrementally). The sharp growth in term deposits has been due to strong NRE flows. The bank added 430 new branches and this has enabled it to withstand competition from peers who have been offering higher savings rates post de-regulation.”
“NII at Rs 3,484.1 crore (+ 22.3% yoy) was driven by strong loan growth, stable NIMs of 4.3% (+10 bps) and high CD ratio. Yield on assets were up 35 bps qoq to a healthy 11.9%. The big surprise was the sharp spurt in other income by 37% yoy to Rs 15,295 crore with fee income growing by a strong 24% yoy driven largely by the retail segment. Compared to last year’s loss of Rs 41.3 crore, trading gains stood at a healthy Rs 66.5 crore while currency gains were higher at Rs 320 crore. Cost to income ratio was flat at 48.5%. We expect the cost to income ratio to be higher in the near term as full operational costs of new branches are recognised. Asset quality continues to remain comfortable with both Gross and net NPLs at 1.0 and 0.2% respectively. Restructured loans constitute 0.3% of gross advances. Without inclusion of Q1FY13 PAT, HDFC Bank remains adequately capitalized at 15.5% (100 bps qoq) with Tier I CAR is at 10.9%.”
“HDFC Bank has reported a strong performance which was marked by strong credit and deposit growth, stable NIMs, aggressive network expansion and steady asset quality and margin accretion. The strong growth in advances seems to suggest that the bank should be able to grow its loan book at a healthy +22% over FY13-14. Demanding valuations of the stock at 3.3x FY14 adjusted book value leave little room for upside. We recommend an ACCUMULATE on declines with a price target of Rs 652 (Target P/Adj BV of 3.75x FY14) representing a potential upside of 12% over the next 12-15 months,” says Ventura research report.
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