Home >Markets >Stock Markets >Emkay gives buy rating to HDFC Bank with target price of 1,500

Emkay Research has given a Buy rating to HDFC Bank share with a target price of 1,500 in 12 months. The brokerage believes that overall business momentum for HDFC Bank remains healthy compared to the industry. The country's largest private sector lender, HDFC Bank has witnessed a loan growth of 16% for quarter ended December 2020. HDFC Bank 's last traded price on Thursday was 1,420 per share.

Here are he key highlights of Emkay Research's report:

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-> HDFC Bank has reported in-line healthy 16% yoy/4% qoq credit growth at 10.8 lakh crore in Q3FY21, which we believe was mainly driven by retail (festive pick-up) and continued momentum in working capital corporate loans.

-> The bank has retained a relatively high mortgage portfolio from HDFCL to the tune of 70.8 bn ( 30.3 bn in Q2FY21/ 42.6 bn in Q3FY20). New credit card origination was suspended by the RBI due to frequent tech-outages. Thus, update from management on remedial measures will be keenly watched by investors apart from the overall outlook on growth/asset quality.

-> HDFC Bank's deposit growth moderated further to 19% yoy/3% qoq to 12.7trn, but the CASA ratio improved 140 bps qoq to 43% - a phenomenon seen across banks. Though management has not provided any update on recent asset quality behavior, we believe that HDFC Bank should also reflect the general positive asset quality experience indicated by other players in the industry.

-> A structurally better cost-income ratio and high provisioning buffer (0.7% of loans in Q2) should help absorb the ensuing moderate asset-quality risk, leading to continued healthy return ratios. However, in the wake of a spate of recent management churn and adverse events, including misconduct in auto business/new card acquisition suspension, we believe that the new top management has a task cut out to overcome these hurdles and sustain its historic management premium.

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