January 25, 2017 / 16:13 IST
HDFCB’s 3QFY17 PAT grew 15% YoY (in-line) to INR38.6b due to healthy core PPoP growth of 17% YoY. Better-than-expected NIM (-10bp QoQ to 4.1% v/s estimate of 15bp+ decline) led to NII beat of 4%. While fee growth moderated to 10% YoY from 14% in 1HFY17, it was better than our estimate.
Outlook
HDFC Bank is well positioned in the current environment, with 42%+ CASA ratio, growth outlook of at least 1.3x industry, and least asset quality risk. With tier 1 capital of 13.8%, strong capacity building amid the moderate growth cycle (branches at 4,555 v/s 1,412 in FY09) and significant digitalization initiatives, the bank is well placed to benefit from the expected pick-up in the economic growth cycle. RoE is expected to be 19-20% in FY17-19. Maintain Buy with a target price of INR 1,510 (3.6x Dec 2018E BV) based on RI model.
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