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JM Financial Services
HDFC Bank (Buy)
CMP: ₹1,254.9
Target: ₹1,520
HDFC Bank reported net profit of ₹7,420 crore in 3QFY20 (+33 per cent y-o-y, in-line with JMFe). Topline growth was a tad soft in the quarter at +13 per cent y-o-y, while core fee growth was strong (+35 per centy-o-y, +17 per cent q-o-q), aided by elevated recoveries from written-off accounts and strong retail fee generation.
The robust growth in core PPOP (+19 per cent y-o-y), was somewhat offset by elevated specific credit costs (1.3 per cent annualised), as slippages increased to ₹5,300 crore in the quarter (2.5 per cent annualised).
Management indicated that the uptick in slippages was partially attributable to one-offs in the agri segment and chunky corporate accounts which together accounted for 28 per cent of slippages (₹1,500 crore). While overall loan growth was healthy at 20 per cent y-o-y, retail loan growth was soft at +14 per cent y-o-y, with the wholesale and overseas loan books growing 32 per cent y-o-y.
We maintain ‘buy’ with unchanged target price of ₹1,520, valuing the bank at 3.4x FY22E BVPS, with subs. contributing ₹102 a share.
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