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UBS Investment Research
HDFC Bank
G ood performance but priced in
�� Event: In line quarter
HDFC Bank (HDFCB) reported 1QFY12 net profit of Rs10.8bn (+34%y/y) which
came in line with our and consensus estimates. NII at Rs 28.5bn (+19% y/y) was
slightly lower than expected as NIM (calc) declined 20bps q/q. Key highlights are
1) CASA ratio dipped 190bp to 49.1%, 2) Strong credit growth of 10%q/q, 3) Core
fee income grew 16%y/y, 4) Asset quality continues to be benign, NPL additions
<1%, 5) bank created Rs2.5bn more floating provisions in the quarter
�� Impact: Maintain estimates
We expect NIMs to remain stable at current levels due to matched ALM while
loans to grow at 23% in FY12-13. HDFCB policy of high floating provisions
provides ample earnings cushion in event of turn in asset quality trends. Cost to
income is likely to remain stable in spite of strong expansion in distribution
�� Action: Neutral, Valuations rich
HDFC Bank is amongst the most expensive financials regionally and therefore
offers limited returns from current levels. We believe the strong underlying
fundamentals of bank are well discounted in the price and we find better value
amongst other large cap Indian financials. We maintain our Neutral rating.
�� Valuation: Raise PT to 545 on roll over to mid FY12-13
We raise our price target by 9% to Rs545 and maintain our Neutral rating. The
stock trades at 4.1xFY12 book and 23.8xFY12 earrings. We base our price target
on residual income method with cost of equity and terminal RoE of 12.75%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
HDFC Bank
G ood performance but priced in
�� Event: In line quarter
HDFC Bank (HDFCB) reported 1QFY12 net profit of Rs10.8bn (+34%y/y) which
came in line with our and consensus estimates. NII at Rs 28.5bn (+19% y/y) was
slightly lower than expected as NIM (calc) declined 20bps q/q. Key highlights are
1) CASA ratio dipped 190bp to 49.1%, 2) Strong credit growth of 10%q/q, 3) Core
fee income grew 16%y/y, 4) Asset quality continues to be benign, NPL additions
<1%, 5) bank created Rs2.5bn more floating provisions in the quarter
�� Impact: Maintain estimates
We expect NIMs to remain stable at current levels due to matched ALM while
loans to grow at 23% in FY12-13. HDFCB policy of high floating provisions
provides ample earnings cushion in event of turn in asset quality trends. Cost to
income is likely to remain stable in spite of strong expansion in distribution
�� Action: Neutral, Valuations rich
HDFC Bank is amongst the most expensive financials regionally and therefore
offers limited returns from current levels. We believe the strong underlying
fundamentals of bank are well discounted in the price and we find better value
amongst other large cap Indian financials. We maintain our Neutral rating.
�� Valuation: Raise PT to 545 on roll over to mid FY12-13
We raise our price target by 9% to Rs545 and maintain our Neutral rating. The
stock trades at 4.1xFY12 book and 23.8xFY12 earrings. We base our price target
on residual income method with cost of equity and terminal RoE of 12.75%.
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