Shares of HDFC Bank gained 2.6 percent intraday on October 7 as Motilal Oswal remained bullish on the stock after the lender disclosed its second quarter performance.
The stock has rallied 10 percent in the last 15 days. It was quoting at Rs 1,210.65, up Rs 21.70, or 1.83 percent, on the BSE at 1121 hours.
The private sector lender said its advances aggregated to approximately Rs 8,97,000 crore as of September 2019, around 19 percent more compared to Rs 7,50,800 crore during the same period last year.
On the sequential basis, the bank reported 8.1 percent growth compared to Rs 8,29,700 crore advances in June 2019.
Growth in the quarter was strong after witnessing a slight moderation in Q1FY20 (advances grew 17 percent/1.3 percent YoY/QoQ).
While maintaining a buy call on the stock with a target price at Rs 1,375 (implying 16 percent potential upside from current levels), Motilal Oswal said the business growth picked up in Q2FY20 after witnessing some moderation in Q1FY20.
“Superior loan profile has enabled HDFCB to consistently gain market share across retail segments (personal loans, business banking, credit cards and auto loans), while strong capitalisation and liquidity levels should sustain this growth momentum over the next few years,” it said.
The lender said deposits aggregated to approximately Rs 10,21,500 crore in September ended quarter, an increase of 22 percent compared to the same period last year, and the sequential growth was 7 percent.
CASA ratio stood at around 39.2 percent as of September 2019 compared to 42 percent as of September 2018 and 39.7 percent as of June 2019, it added.
During the September quarter, the bank purchased loans aggregating Rs 7,160 crore through the direct assignment route under the home-loan arrangement with Housing Development Finance Corporation Limited.
Motilal Oswal said margin expansion, robust fee income profile and strong control on operating leverage were likely to drive an improvement in return ratios.
The brokerage expects margins to remain stable QoQ at 4.3 percent, and thus, estimates NII to grow around 18 percent YoY.
“Opex growth at 16 percent YoY is expected to trail total income growth of 21 percent YoY, leading to a pre-provisioning operating profit (PPoP) growth of around 24 percent YoY. Thus, CI ratio is expected to decline 145bp YoY (-50bp QoQ) to 38.5 percent,” Motilal Oswal said.
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New Source: Moneycontrol