HDFC Bank’s Q4 net profit was in line. Top-line growth was healthy (+22% y-o-y) on stronger-than-expected loan growth (+27%) and pick-up in fee income (+16%), as this helped offset the pick-up in opex on large branch additions (+240 branches in 4Q). NPLs were stable at 94 bps, and credit cost low at 60 bps.
Retail loan growth (+30%) momentum sustained and was strong across key segments, while corporate loan growth (+24%) hasn’t come down as market share gains have accelerated. The bank continues to invest in franchise expansion (+240 branches in Q4), which augurs well for future growth potential (CASA +19% y-o-y).
Fee income growth (+16%) picked up, driven by TPP, retail processing and transactional fees. NPL slippages were steady at 1.5%, credit was low as it utilised contingency provisions (Rs 3 billion) to partly offset the impact from one large government account.
The bank’s investment in franchise build up (digital + distribution) is yielding results, driving strong market share gains. With continued strength in consumer credit cycle, it is well placed for 20%+ assets and earnings growth. We cut EPS 3% on opex. Maintain ‘outperform’. HDFC Bank is a CS AxJ Focus List stock.