HDFC Bank growth to come from investments it made over 2 yrs: DB

Moneycontrol BureauDeutsche Bank maintains a buy call on HDFC Bank and raises its target price to Rs 1,370. The brokerage house believes bank’s growth could come from the investments it has made in branches and employees over the last two years.

“Over the past two years, it has added 33 percent to its branch network, 28 percent to the employee base, invested in digital, and been aggressive on the corporate side. All of these should lead to strong growth,” says the report.

The bank’s current and savings accounts have continued growing at 20 percent in the last fiscal year, despite the bank paying 4 percent against the peers’ 6 percent, adds the report.

The bank is expected to offer more mortgage loans and corporate loans as a result of which the net interest margin would go down, says the report. But this will be offset by lower costs as “large investments have been made and new products like mortgages, corporate should have lower credit cost.”

The only downside the brokerage house sees is a slowdown in bank’s deposit generation.