HDFC Bank (NYSE:HDB) gave 30% YoY growth for current financial year, which is as per our estimate. As NII grew 22% YoY, moderate fee grew at 11% YoY, which gave PPP growth of 18%. As sub Segment were reclassified, P&L prior to PBT can’t be compared at this stage. However, our working suggests that NII was more than 6%, which is above our estimates.
HDFC bank is good positioned in current market scenario as it has CASA ration of 45% 1.3x growth compared to industry outlook. HDFCB operation efficiency is increasing. Increased traction income due to expansion in branch network. Best of all in class assets. As there are positive sentiments with business of HDFC bank, we feel valuation of HDFC bank is very rich at this junction and we maintain NEUTRAL rating for the bank.
NIM increases 20bp
NII grew 10%, which was led by very strong improvement of NIM of 20 bp. NIM of was around 4.4% vs 3.9%, as reported previously. NIM improvement was led by higher shared of retail loan with give higher yield and higher portion of CASA. Management was expecting margin to be in range of 4.1-4.5%
SA accretion highest
Saving account deposit grew to substantial level. Our working shows SA grew at 8%, in spite of stiff competition given by competitors. Over, all SA acceleration has help bank to maintain its rich valuation and lower the cost of fund. Over all CASA stood to 45%.
Valuation and view
HDFC Bank has very rich valuation, which conforms its strong position among its competitors. CASA ration stands at 45% and growth outlook stands to 1.3x the industry growth. Improving operational efficiency is help to strengthen rich valuation of HDFC bank. Traction in income due to expansion of branch network helps HDFC bank to earn more.
We expect CAGR of 25% and we maintain NEUTRAL opinion for HDFC Bank.