HDFC Bank Q3 Results Review - Slight Moderation In Loan Growth Likely: Prabhudas Lilladher

Prabhudas Lilladher Report

HDFC Bank Ltd. saw stable quarter; net interest margin (in-line) improved by 7 basis points QoQ to 3.73% as excess liquidity was utilised to retire wholesale deposits, thereby increasing loan-to-deposit ratio by ~3% QoQ.

Loan growth at 4.9% QoQ was led by CRB, housing and constant currency. With system liquidity in shortfall and peak LDR at 77.4%, deposit growth should be faster for current loan momentum to sustain, failing which system loan accretion should reduce in FY25/26E, compressing LDRs.

Factoring a 15% compound annual growth rate for HDFC Bank, we trim loan growth by 1% in FY25/26E which would impact NIM by 4/5 bps. This could be partly offset by lower opex given softer deposit requirement; our core profit after tax reduces by 2%/4%.

While falling LDR could pressurize NIM, bank would focus on-

1. controlling deposit cost and

2. improving share of current account and savings account and higher yielding retail.

Maintaining multiple at 2.7 times, we revise target price to Rs 2,000 from Rs 2,025. Retain ‘Buy’.

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