Analysts appreciated HDFC Bank’s performance in the September quarter and highlighted the stable asset quality at the bank as well. They largely maintained their positive rating on the stock, by seeing an upside of 22-25%.

HDFC Bank mentioned a well 20.6 % year-on-year growth in Q2 FY19 profit to Rs 5,005.73 crore, driven by net interest income (NII), other income and operating income. However, higher provisions limited the bank’s profitability.

Profit in the year-ago period stood at Rs 4,151 crore. NII, the difference between interest earned and interest expended, rose 20.6 % to Rs 11,763.41 crore compared to the same quarter last year. HDFC Bank said, “NII growth was driven by average asset growth of 22.9% and a net interest margin of 4.3%”.

Loan book grew 24.1 % YoY to Rs 7.50 lakh crore, while deposits growth was 20.9% at Rs 8.33 lakh crore in the September quarter.

The lender said that current account savings account (CASA) deposits, which contributed 42 % to total deposits, rose at 18.3 %, with savings and current account deposits rose 18.7 % and 17.7 %, respectively. “The focus on deposits has helped us maintain liquidity coverage ratio at 118 %, much above the regulatory requirement,” the bank said in an exchange filing.

Asset quality was stable as gross non-performing assets (NPAs) stood flat at 1.33% sequentially. Net NPA fell to 0.4 % in Q2 as against 0.41% in the June quarter.

At 9:30 am on BSE, the stock was trading about 2% higher at Rs 2,000.20.

Here’s a look at what analysts are saying about the bank’s Q2 show:

  1. The lender will continue to gain market share ahead. It sees the pre-provision operating profit RoA growth to be strong at 3.4 % in FY20 and sees a return on equity to improve to 18%.
  2. Another analyst said that the lender’s recent capital raise should support healthy loan growth. Cost optimisation should drive profitability and support premium valuations.
  3. One of the analysts said that HDFC Bank’s profit growth (PAT) was broadly in line with estimates. The profit before tax, ex-treasury impact, grew 30% year on year. Meanwhile, core PPoP grew 28% YoY, which was helped by robust revenue growth. The overall asset quality was stable.
  4. It has also said that at 3.2x PBV FY20, the stock provides good risk reward. Also, it believes that the bank is a significant combination of strong profitability and liquidity.
  5. The global research firm observed that the September quarter show by the bank was a stable performance with 21 % profit growth and maintained asset quality. It continued to gain market share on both assets and deposit side.
  6. There was a robust loan growth of 24% led by all-around performance as well. It sees a potential upside of 22 %.
  7. One of the analysts observed that the bank had yet another consistent quarter with improved traction in core operating profitability. Its sound fundamentals were supported market share and spurring loan growth.

The asset quality was a stable outlook. It sees an upside of 25% on the stock. On Friday on BSE, the stock ended at Rs 1,965.8, down 0.46 %.

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