Financials - TOP PICKS HDFC Bank ( TP : ` 590, Acc) 􀁹Dolat Capital

Financials - TOP PICKS
HDFC Bank (TP : ` 590, Acc)
􀁹 Loan book expansion higher than industry in Q4 FY12 and has always maintained above industry
th ( 22% growth (~to 27%) in the past. We expect credit to expand faster than the system at CAGR of
25% over FY12-14; primarily led by higher growth in retail book as compared to corporate loan book
􀁹 The bank has been able to maintain the CASA ratio above 48% over the past few years (one of the
highest CASA share in thebanking space), thereby maintaining the cost offunds at a lowlevel, and
aiding margin
􀁹 Change in credit book composition towards high-yielding credits, jump in yield on advances (mainly
due to higher composition of retail loanbook) and higher C-D ratio aid margin. Goingforward, we
expect NIM to stabilize at 4.2-4.3% on yearly average basis
􀁹 Has a strong and diversified source of fee based income which contributes nearly 83% to the nonfundincome
􀁹 Even in turbulent times, the bank managed to contain erosion in asset quality with stable gross NPA
& restructured loan. The bank’s has been maintaining best asset quality amongst the peer group
with gross NPA at 1.02% and NNPA at 0.2%. Total restructured assets were 0.4% of the bank’s
gross advances as of Q4 FY12
􀁹 At current price, the stock quotes at 3.7x and 3.1x adjusted book value (ABV) FY13E and FY14E
respectively. Based on our price target of ` 590, the stock will trade at 4x and 3.4x ABV FY13E and
FY14E respectively

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