HDFC Bank Q1 Results Review - Net Interest Margins Stable; RoA To Be Maintained Post-Merger: IDBI Capital

IDBI Capital Report

HDFC Bank Ltd.’s proforma merged deposits grew by 16% YoY (versus 19% standalone) as non-retail deposits declined. Further, proforma merged advances grew by 13% YoY (versus 20% YoY standalone) as non-individual loans of Housing Development Finance Corporation Ltd declined.

Net interest margins remain stable at 4.3% QoQ and expected to decline post-merger due to lower yields on HDFC book.

Asset quality remain stable as gross non-performing asset stood at 1.17% versus 1.12% QoQ led by agri slippages.

Restructured assets declined to 0.27% of advances versus 0.37% (QoQ) led by recoveries and write offs.

Net interest income grew by 1% QoQ while pre-provision operating profit grew by 1% QoQ due to higher other income. Provisions increased by 6.5% QoQ resulted into credit cost at 0.70% versus 0.67%.

Thus, profit after tax declined by 1% QoQ.

We maintain 'Buy' rating with the target price of Rs 2,050 valuing parent business at Rs 1,876 (2.7 times price/adjusted book value FY25) and rest for the subsidiaries.

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