Buy HDFC Bank; target of Rs 1417: Geojit BNP Paribas

Advances increased by 18% YoY mainly driven by retail segment (↑22% YoY). All the retail segments delivered high double digit growth barring gold loans. Thus, proportion of retail segment increased to 55% (↑269 bps YoY) in the total domestic loan book. On liabilities side, demonetization led to strong CASA flow (+37% YoY) especially led by savings account (SA) growth of 38% YoY.

OutlookGiven the bank’s higher credit growth (17% CAGR over FY16-19E), best in-class asset quality (Gross NPA of 1.2% by FY19E) and superior return ratios (RoE of 19% and RoA of 2.2%), we expect the bank to continue to command premium valuation over its peers. Further, we believe that HDFC Bank is best placed to garner additional market share in both retail assets and liabilities given its strong retail franchise. Hence, we maintain a BUY rating on the stock with revised target price of Rs 1,417 (3.2x FY19E P/ABV). We have largely maintained our estimates for FY17-18E and introduced FY19E estimates.