HDFC Bank (HDFCB) released the quarterly update highlighting the key business numbers for Q3FY20. Business growth momentum was strong in Q3FY20 with total advances increasing by 19.6% y-o-y/4.1% q-o-q to Rs 9.3t driven by festive season demand.
Deposit base increased robustly by 25.2% y-o-y/4.5% q-o-q to Rs 10.7t (v/s +22.6% y-o-y/7% q-o-q in Q2FY20). The bank’s CASA ratio declined 120bp y-o-y but was up 20bp q-o-q to 39.5%, implying 21.5% y-o-y (+5.1% q-o-q) growth in CASA deposits. Term deposits increased at ~27.8% y-o-y (+4.1% q-o-q), in line with management guidance.
During the quarter, the bank purchased loans aggregating Rs 42.6 bn (Rs 71.6 bn in Q2FY20) through the direct assignment route from HDFC.
Business growth momentum was strong in the December quarter, despite the slowing macro environment.
Superior loan profile has enabled HDFCB to consistently gain market share across retail segments (personal loans, business banking, credit cards and auto loans), while strong capitalisation and liquidity levels will help sustain this momentum over the next few years.
Stable margins, a robust fee income profile and strong control on operating leverage are likely to drive an improvement in the return ratios. We maintain ‘Buy’ with a target price of Rs 1,410 (3.8x FY21E ABV for the bank)
