Neutral on HDFC Bank - 1QFY13 Results Update - Motilal Oswal

HDFC Bank's 1QFY13 PAT grew 31% YoY to INR14.2b (in-line with estimates). Key positives: (1) Above industry loan growth (+9% QoQ, 22% YoY), (2) NIM of 4.3% (+10bp QoQ), (3) strong fee income (+23% YoY), and (4) stable asset quality.

Key highlights:

- Loan growth was driven by corporate segment (+15% QoQ, 11% YoY), forming 73% of loans during the quarter. Retail loans grew 4% QoQ and 33% YoY and its share stood at 52.4% as against 54.8% in FY12.

- SA deposits growth was impressive (+4% QoQ, +18% YoY), despite increasing competitive intensity post deregulation in savings deposit rates. However, sequential decline in CA deposits (down 8% QoQ - seasonal in nature) led to fall in CASA ratio to 46% v/s 48.4% a quarter ago.

- Other highlights: 1) HDFCB opened 20 branches and 796 ATMs during the quarter. Outstanding pool of floating provision stood at INR16.75b (INR7/share).

Valuation and view: HDFC Bank is best placed in the current environment, with (1) CASA ratio of ~46%, (2) growth outlook of 1.3x of the industry, (3) improving operating efficiency, (4) expected traction in income due to strong expansion in branch network and (5) best in the class asset quality. While we remain positive on the bank's business, we believe valuations are rich. Over FY07-12, peak one-year forward P/BV was 5x and average one-year forward P/BV was 3.4x. The stock trades at 3.9x FY13E and 3.3x FY14E BV. Maintain Neutral.

Source : Equity Bulls

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