Shares of India’s largest private sector lender HDFC Bank surged 2.4% on the opening bell on Monday to trade at Rs 1,228 per share, days after the bank reported an 18.4% on-year jump in net profit to Rs 7,513 crore. HDFC Bank’s July-September quarterly results were better than expected buoyed by a 16.7% on-year jump in net-interest income and 40.3% surge in other income. HDFC Bank has been outperforming domestic benchmark indices since March, gaining over 57% till date while Sensex and Nifty have climbed 55%. HDFC Bank maintains its industry leading position as new CEO steps in.
At the end of the moratorium in August, the amount collected as a percentage of the amount demanded from the retail moratorium portfolio was at 95%. “A similar trend can be extrapolated for the overall portfolio – compared to the pre-Covid level of 99%,” said analysts at ICICI Securities. HDFC Bank’s fee income rose 77% on-quarter but was flat when compared to the previous year. ICICI Securities has a ‘Buy’ rating on the stock with an increased target price of 1,493 per share as it expects earnings to grow 15% this fiscal year.
NPA provisions in the quarter were down to Rs 1,240 crore from Rs 2,041 crore in the same quarter last year. Other provisions were up 273% from the previous year. “Due to negligible slippages, bank’s asset quality improved by 30/20bps QoQ on GNPA/NNPA, while considering pro-forma asset quality would have been at very similar levels of last quarter levels,” said brokerage and research firm Prabhudas Lilladher in a note. According to the report, HDFC Bank has contingent + floating provisions of Rs 7,500 crore. The company management said that its overall growth continues to be driven by wholesale loans and highlighted that disbursements have reached 82%-85% of the pre-coronavirus levels.
“We have seen that HDFC Bank has demonstrated that it has one of the best banking franchises among private banks and usually tends to use the regulatory forbearances sparingly,” said Kotak Securities in a note. Adding that this comfort helps in building a positive view of the lender. “Our broad thesis has been to have a higher preference for the large caps in financials given the loan mix that has a higher share of salaried segment, strong liability franchise and better operating profits to deal with the post-Covid stress,” they added. Kotak Securities has an ADD rating on HDFC Bank with a fair value of Rs 1,300 per share.
Driven by higher pre-provision operating profit (PPOP), CLSA has revised financial year 2022 earnings by 3%, which will also be aided by lower credit costs. CLSA has increased its target price to Rs 1,525 per share from Rs 1,450 apiece, earlier.