“In Q4 FY12, HDFC Bank’s (HDBK) NII grew 19.3% YoY to Rs 33.9bn- 6.7% higher than our estimates of Rs 31.6bn. The bank reported bottom-line of Rs 14.5bn compared to our estimates of Rs 14.6bn. A 70-bps QoQ rise in CASA share to 48.4% and higher yield on advances led to 10bps improvement in margin on sequential basis. Improvement in margin on sequential basis at 4.2% was mainly due to higher yield on advances (YoAA); better YoAA was due to higher composition of retail loan book. Also, running-off of 5%-6%of low-yielding whole-sale credit book aided margin.”
“In Q4FY12, HDBK enjoyed higher CASA deposits due to floats in form of issuance of tax-free bonds and redemption of some of the CDs. On non-interest income front, much higher foreign exchange income was due to higher volume from clients and due to volatility in FX rates. Consistent core fee income growth and traction in forex gains lifted operating profit growth. The bank’s asset quality remains strong and the management does not expect any negative surprise going forward. Due to contained NPLs, decline in baddebt provisions was seen on YoY basis. HDFC Bank added 343 branches and 1803 ATMs in Q4 and reflected higher operating overheads.”
“We introduce FY14 earnings estimates and rollover our price target on FY14 at Rs 590. At current price, the stock quotes at 3.1x adjusted book value FY14, and based on the target price, the stock will trade at 3.4x ABV FY14. We rate the stock as an Accumulate with a price target of Rs 590,” says Dolat Capital research report.
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