HDFC Bank Q1 Results Review - Unmerged Bank Growing Relatively Slower, Merged Entity More So: Yes Securities

Yes Securities Report

Housing Development Finance Corporation Ltd.’s entire loan book taken together with unmerged HDFC Bank Ltd., including the impact of inter-bank participation certificates, have delivered a growth of 13% YoY:

Net of IBPC, loan growth for the unmerged bank was 15.7% YoY (0.9% QoQ) whereas, gross of IBPC, the loan growth was 20% YoY. For HDFC, Individual loans have grown 14% YoY but non-individual loans have de-grown 18% YoY since the management is re-assessing these loans before they decide to grow this business again.

Cost of funds has moved up ~30 basis points QoQ to 4.0%, which has outpaced the ~20 bps rise in yield on assets to 8.1%:

Apart from deposit book re-pricing, another key reason for the rise in cost of funds in the change in the composition of deposit book. While term deposits have grown 5.0% QoQ, savings account deposits have de-grown -0.3% QoQ and current account deposits -7.7% QoQ.

Management explained that HDFC Bank’s term deposits are not priced aggressively but rather at or just below competitor pricing.

We maintain a less-than-bullish 'Add' rating with an unchanged price target of Rs 1950: We value the standalone bank at 2.5 times FY25 price/book value for an FY24E/25E/26E return on equity profile of 15.6/16.1/16.5%.

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