HDFC Bank (TP : ` 627, ACC)
HDBK’s diversified credit book with prudent expansion strategy has led to healthy yield and
minimal delinquencies. High low-costdeposits share contain erosion in margin and also aides
the bank to cross-sale its other products to huge low-cost depositors base. We expect credit
to expand faster than the system at CAGR of 21% over FY12-14
Slight re-balancing in credit book in favor of high-yielding assets aided yield on advances
(mainly due to higher composition of retail loan book). Higher asset yield and expansion in CD
ratio aided margin. Going forward, we expect NIM to stabilize at 4.2% on yearly average
basis
Majority of fee income comes from various retail segment and is quite diversified. Incremental
adverse impact on the bank’s fee income would be muted
HDBK demonstrated robust performance on asset quality front; GNPA & restructured loan
book remained almost stagnant. The bank has been maintaining most comfortable asset
quality amongst the peer group with GNPA at 0.97% and NNPA at 0.2%. Total restructured
assets were 0.3% of the bank’s gross advances as of Q1 FY13
At current price, the stock quotes at 4.0x and 3.4x adjusted book value (ABV) FY13E and
FY14E respectively. Based on our target price of ` 627, the stock would trade at 4.2x and 3.6x
ABV FY13E and FY14E respectively
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