HDFC Bank outlook: Check out what brokerages have to say

HDFC Bank’s scrip scaled to a new 52-week high of Rs 1,725 per share after it reported Q2FY22 numbers. The bank has posted a 17.6% rise in its consolidated net profit at Rs 9,096 crore for the second quarter ended September 2021. In the corresponding quarter in the year-ago period, the bank had posted a consolidated net profit of Rs 7,703 crore.

Net interest income, the difference between interest earned and interest paid, increased 12.1% YoY (Year on Year) to Rs 17,684.4 crore during the quarter, with healthy loan growth. The advances increased to Rs 11.98 lakh crore in Q2FY22 YoY and the same increased 4.4%, sequentially. Loan growth was supported by, “retail segment that registered 12.9% YoY growth and commercial & rural banking segment that grew 27.6% YoY during the quarter,” said the bank. Simultaneously deposits of the bank came in at Rs 14.06 lakh crore in the quarter ended September 2021 increased 14.4% compared to the corresponding period previous fiscal, with retail deposits growth 17.5% and wholesale deposits at 2% YoY.

The bank reported gross non-performing loans at 1.35% of gross advances as of September 2021 compared to 1.47% in June 2021 while net non-performing assets at 0.4% for the quarter declined from 0.48% in the previous quarter.

Most brokerages are gung-ho on the bank.

Here’s what they have to say:

Jefferies | Rating: Buy | Price Target: Rs 2,070

HDFC Bank’s improved growth momentum could aid rerating for the stock. The uptick in retail & commercial lending segment is the key positive for the bank. Operating profit growth dragged in Q2FY22 led by an increase in cost. However, the momentum is likely to improve going ahead.

Phillip Capital | Rating: Buy | Price Target: Rs 2,032

Bank witnessed a strong bounce back in retail disbursements during Q2. Bank management sounded extremely hopeful about gaining market share in small ticket advances across products. Bank continues to invest in physical/digital footprint; expand its presence in rural segment and expand the product offering to target segments like BNPL (Buy Now Pay Later), small retail stores etc. The improvement in bounce rate, collection efficiency and sequential growth in disbursement in small ticket loans provides confidence of strong momentum in business activity and recovery in the overdue portfolios. The private lender continued to strengthen its balance with the overall provision now at 2.2% of the loan book. Strong growth aided by improvement in asset quality going ahead will help HDFC banks deliver PAT growth of ~17% FY21-23.

CLSA | Rating: Buy | Price Target: Rs 2,025

HDFC Bank’s Q2FY22 growth rebound has been strong and remains the key driver for earnings. The global brokerage firm sees strong earnings growth again. With fresh slippages remaining low and the restructured book is well provided (Rs 9,200 crore contingency provisions) provides comfort for normalizing costs. Management guidance indicated retail & commercial growth to accelerate.
CLSA expects an 18% earnings CAGR (Compounded Annual Growth Rate) over FY21-24.

Edelweiss | Rating: Buy | Price Target: Rs 1,970

The key highlight for HDFC Bank in Q2FY22 is strong disbursements and better recovery trends, which the bank expects to sustain. Elevated slippages (1.8%, although declining), higher restructuring (1.5%) and further contingency provisions of Rs 1,200 crore led to elevated credit cost. Bank’s lower asset quality vulnerability than peers even in covid times bears testament to its risk selection and capital productivity consciousness.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing)