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IDBI Capital
HDFC Bank (Buy)
CMP: ₹839.90
Target: ₹994
HDFC Bank delivered operationally in line numbers with decent business growth coupled with stable margins and non-volatile asset book. HDFC Bank with its best in class underwriting abilities and wide branch network would be able to gain faster growth momentum compared to its peers.
We firmly believe that the bank is well positioned to gain credit growth momentum in improving economic environment and accordingly we expect advances for the bank to grow by 23.5 per cent CAGR from FY14-16E followed by deposit growth of 20.5 per cent CAGR from FY14-16E. Thus, we assume credit-to-deposit (CD) ratio for the bank to increase to 85 per cent levels from 83 per cent during FY14.
We assume PAT growth of 20.8 per cent CAGR from FY14-16E driven by 20.0 per cent CAGR growth in NII and 14.9 per cent CAGR growth in other operating income. We expect margins for the bank to remain stable at an average of about 440 bps for FY15-16. We expect operating cost for the bank to rise by 16.5 per cent CAGR whereas provisioning charges for the bank to rise by 17.8 per cent CAGR from FY14-16E on the back of stability in fresh slippage ratio and steady recovery mechanism.
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