Buy HDFC Bank; target of Rs 2200: Motilal Oswal

Motilal Oswal's research report on HDFC Bank

HDFC Bank (HDFCB) reported a 4QFY25 net profit of INR176.2b (7% YoY growth; in line). The bank’s NII grew 10.3% YoY to INR320.6b (5% beat), boosted by strong loan growth and INR7b of interest on IT refunds. Core NIM expanded 3bp QoQ to 3.46% in 4Q from 3.43% in 3QFY25. Other income stood at INR120.3b (inline). Opex declined 2% YoY to INR175.6 (inline). The C/I ratio improved to 39.8% (40.6% in 3QFY25). Provisions declined 76% YoY to INR31.9b (in line). PPoP stood at INR265.4b (4% beat) during the quarter. The GNPA/NNPA ratio improved 9bp/3bp QoQ to 1.33%/0.43%. PCR stood broadly stable at 67.9%. Fresh slippages were INR75b vs. INR88b in 3QFY25. Advances book rose 5.4% YoY/4% QoQ to INR26.2t. Deposits grew 14% YoY/ 6% QoQ to INR27.1t. The C/D ratio eased 173bp QoQ to 96.5%. HDFCB’s CASA ratio stood at 35% for the quarter.

Outlook

We raise our earnings estimates by 3%/5% for FY26/27 and estimate HDFCB to deliver an FY27E RoA/RoE of 1.9%/14.6%. We reiterate our BUY rating with a TP of INR2,200 (based on 2.4x FY27E ABV + INR307 for subs).

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