Broker's call

Equirus Securities

HDFC Bank (Add)

CMP: ₹1,808.80

Target: ₹2,000

HDFC Bank (HDFCB) reported an in-line 2QFY18 PAT of ₹4,150 crore (Equirus estimate ₹4,160 crore) driven

by healthy NIMs (4.3 per cent) and loan growth (+22 per cent y-o-y). Wholesale loans grew 27 per cent y-o-y while the CASA ratio declined to 42.9 per cent (1QFY18: 44 per cent). Provisions jumped 97 per cent y-o-y as the bank provided about ₹700 crore towards one standard 5:25 restructured account which is currently under discussion with the regulator. Slippages came in at ₹2,470 crore (1QFY18: ₹3,100 crore). We believe HDFCB will continue its steady performance over FY17-FY20E with a 19 per cent loan CAGR led by wholesale loans, NIMs within the guided range of 4.1-4.4 per cent, an improvement in the C/I ratio and stable asset quality. We largely maintain our earnings estimate and retain ADD with an ERoE-based September 2018 TP of ₹2,000 (₹1,875 earlier) which corresponds to a 4.9x/4.2x September ’18/ September ’19 ABV of ₹408/476.

Key risks: A protracted slowdown in the economy, considerable increase in fresh slippages and adverse regulatory changes are key risks to our call.