"HDFCB’s Q2FY15 PAT came in at Rs 23.8bn (+20% YoY) led by 10bps QoQ improvement in margins, partly offset by higher other operating expenses. Loan growth was contributed by both the non-retail and retail books, but the business banking book declined. Asset quality was largely stable during the quarter and the restructuring book declined to 0.1% of gross advances. Valuations at 17.3x FY16E earnings and 3.5x FY16E ABV are reasonable against the backdrop of strong growth and pristine asset quality."
"Despite some slowdown in fee income growth, we maintain our estimate of 21% earnings CAGR over FY14-FY17. Capital raising looks likely in FY15 despite 11.8% tier-I (not factored in our estimates). Healthy asset quality, strong earnings growth and a comfortable capital position would help sustain the bank’s premium valuations. Maintain BUY for target price of Rs 1025", says Religare Capital research report.
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