Stocks

Broker's call: HDFC Bank (Buy)

| Updated on April 07, 2021

Emkay Global

HDFC Bank (Buy)

Target: ₹1,850

CMP: ₹1440.95

HDFC Bank has reported a loan growth of 14 per cent y-o-y/5 per cent q-o-q at ₹11.3 lakh crore, which is slightly lower than our expectation of around 16 per cent y-o-y/6 per cent q-o-q growth, mainly owing to relatively moderate momentum in retail (possibly due to conscious moderation in VF, including CV book). New card business acquisition remains suspended, but back-book should see reasonable growth amid rising consumption.

The bank has accelerated the purchase of mortgage loans from HDFC to ₹7,500 crore in Q4 from ₹7,100 crore in Q3, which is largely in line with recent trends and expectation.

Overall, we believe that HDFC Bank's business momentum has moderated a bit in Q4. On the asset quality front, we believe agri and CV portfolios could show some stress, but overall NPA ratios should remain range bound.

In our view, the restriction imposed by the RBI on the bank's credit card business is likely to remain an overhang on the stock as any relief in form of the early lifting of the suspension could be delayed in the wake of recent tech outages. Currently, we have a ‘Buy’ rating on the stock.

Published on April 07, 2021

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