HDFC Bank Q4 Results Review - Core Performance Inline; Margins Improve QoQ: Motilal Oswal

Motilal Oswal Report

HDFC Bank Ltd. delivered a healthy quarter, with net interest margins improving 4 bp QoQ and the credit-deposit ratio declining 6% QoQ to 104%. Profit after tax (adjusted for one-offs) and net interest income both stood in line with our estimates.

HDFC Bank prudently deployed the stake sale gains from Credila (Rs 3.4 billion) and tax credit to further strengthen the balance sheet as it made floating provisions of Rs 109 billion during the quarter.

Opex jumped as the bank made Rs 15 billion of staff ex-gratia provisions; however, the adjusted credit-income stood at 41.3%.

Gross non performimg asset ratio improved 2 bp QoQ to 1.2%, while provision coverage ratio was largely flat at 74%. Fresh slippages increased marginally to Rs 73 billion or 1.2% of loans.

Over FY24-26, we estimate HDFC Bank to deliver 13.5%/18% compound annual growth rate in loans/deposits and 16% CAGR in earnings, translating into return on asset/return on equity of 1.9%/15.5% by FY26. 

We reiterate our Buy rating with a target price of Rs 1,950 (premised on 2.4 times FY’26E adjusted book value plus Rs 253 for subs).

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