Post merger, focus has been to reduce the credit-deposit ratio to pre-merger average which resulted in credit slowdown to the lowest in history. Also, net interst margins have declined due to higher borrowings on the books. IDBI Capital remains structurally positive on HDFC Bank given its superior credit underwriting, and the ability to maintain stable RoA around 1.8% post-merger.
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IDBI Capital Report
HDFC Bank Ltd. reported slower credit growth at 5% YoY (4% QoQ) while deposit growth stood at 14% YoY (6% QoQ) led by focus on lowering of credit-deposit ratio; at 96.5% versus 98.2% QoQ. Management maintained guidance for improvement in credit growth similar to industry average during FY26 and higher than industry during FY27.
Net interest margins remain range bound at 3.46% (adjusted for income tax refund) versus 3.43%; however, we need to watch out for impact of rate cut on NIMs as ~70% loan book is linked to EBLR.
Asset quality slightly improved as gross non-performing asset stood at 1.33% vs 1.42% QoQ led by lower slippages. Net interest income grew by 10% YoY led by improvement in NIMs while pre-provision operating profit declined by 9% YoY due to lower other income (down 34% YoY). PAT grew by 7% YoY led by lower provisions.
We have revised estimates upwards slightly. We maintain Buy rating with the target price of Rs 2,200 (Rs 1,970) valuing parent business at Rs 1,992 at 2.3 times price/adjusted book value FY27E.
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. Read more on Research Reports by NDTV Profit.IDBI Capital remains structurally positive on HDFC Bank given its superior credit underwriting, and the ability to maintain stable RoA around 1.8% post-merger. Read MoreResearch Reports
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