Axis Direct's research report on HDFC Bank
HDFC Bank reported a healthy set of numbers in a tumultuous quarter with PAT of Rs 38.7 bn (up 15.1% YoY) and stable asset quality (GNPLs at 1.05% vs. 1.02% in Q2FY17). Deposits surged significantly (21% YoY) due to demonetization, with savings and current depositsrising 38% YoY and 37% YoY, taking the terminal CASA ratio to 45.4% (+495 bps QoQ).
OutlookWe expect RoA to be 1.9% in medium term on back of market share gains, fee income growth, and maturing investments in branch network. Focus on rural and digital initiatives would also bear meaningful dividends over medium term. At CMP of Rs 1,268, the stock trades at 3.9x/3.3x FY17E/FY18E ABV of Rs 326/ Rs 381. We value HDFC Bank at 3.7x FY18 P/ABV to arrive at TP of Rs 1,400.
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