"HDFC Bank's (HDFCB's) Q2FY13 results highlight flexibility and levers that the bank has to deliver consistent +30% PAT growth. Growth continues to remain ~5% above industry levels and core fee trends remain relatively strong. Credit costs do not seem to normalize as against management's cautious stance and reversal of rate cycle will potentially be a positive for margins. We maintain our ACCUMULATE rating with a PT of Rs660/share as valuations adjusted for floating provisions are at historic averages."
"Loan growth at ~9% QoQ was strong even relative to HDFCB's H1 seasonality every year. Both retail and corporate segments recorded robust growth but HDFCB continues to deliver high growth in CV/CE, unsecured and gold portfolio. Reported fee income was weak but that was largely driven by one off MTM losses apart from which core fees grew at healthy ~22% YoY growth. Base rate cut in June end led to a sequential ~10bps fall in margins but we believe fixed rate loan book will be beneficial in a falling rate environment and management guidance of ~3.9-4.2% margin range seems conservative considering current margins at 4.2%. Asset quality continued to hold, with provisioning coming in lower than expected. HDFCB added Rs0.75bn to floating provisions which now stands at 0.8% of the loan book. Management noted some pick up in the credit costs from the lows in CVs/SME but absolute delinquencies remain very manageable. (Pls see attached note on sectoral feedback on asset quality)."
"We revise our PT to Rs660/share as we rollover to FY14 book v/s Sep-13 book earlier. Our PT implies ~3.75x FY14 book which is higher than 5/7 yr avg. valuations of ~3.5x 1 yr fwd book but adjusting for floating provisions (8% of FY13 networth) implied valuations are in line with historic averages at ~3.5x FY14 book," says Prabhudas Lilladher research report.
Institutional holding more than 40% in Indian cos
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