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JMFL
HDFC Bank (Buy)
CMP: ₹1,933.05
Target: ₹2,500
HDFC Bank’s 20.3 per cent y-o-y growth in PAT was in-line with estimates driven by a strong fee income and controlled opex ratios. Loan growth at 18.7 per cent y-o-y, however, lagged our expectations albeit on a high base of 4QFY17. We expect the same to bounce back to recent trends as corporate lending picks up (single digit y-o-y growth in 4QFY18 versus average of 18 per cent seen in first nine months of the year). Slippage ratio was at 1.86 per cent for 4QFY18 versus average verage of 2.2 per cent in the past four quarters.
Core fees grew a robust 30 per cent y-o-y and should sustain at healthy rates as against mid-teens growth last few years. With controlled opex (core CI ratio improved by 180 bps y-o-y), core PPOP registered a healthy 24.8 per cent growth. In our view, HDFC Bank remains well placed to further consolidate its leadership position in retail lending in addition to being a key beneficiary of increasing share of private sector banks in corporate loans.
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