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Equirus Securities
HDFC Bank (Long)
Target: ₹1,850
CMP: ₹1,486.45
Despite nearly 29 per cent share of unsecured loans, gross/net slippages were contained at 1.5 per cent/1.1 per cent in a Covid-impacted year with restructured assets at 0.6 per cent. While GNPL ratios declined in industry segments, it increased for personal/services loan.
Bank has re-iterated its strategic priorities of: reimagining branch channel as a Phygital financial service marketplace; tapping Semi-urban/Rural branches growth potential; tapping opportunities around payments business;Digital 2.0 initiatives for hyper personal customer experiences and opex optimisation; and wider Customer engagement via Virtual Relationship management. Technology is both an area of strength and weakness with specific initiatives taken for infrastructure scalability, disaster recovery, security enhancements and monitoring. Despite Covid’s second wave, we expect earnings growth to be steady in line with past trends with contained credit cost given: HDFC Bank’s customer base is within the top quartile and has demonstrated better trends than industry avg; 35-40 per cent of the portfolio has been originated post the credit filter tightening done by the bank two years ago; and HDFC Bank has not been originating new credit cards. We retain Long with Mar’22 SOTP-based target price of ₹1,850.
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