Now, after leading brokerage Prabhudas has clarified some of its concerns with the management, it holds a bullish view on the counter and raised its target price to Rs 1,800 from the earlier Rs 1,740. This considering Friday’s closing price of Rs 1,493, amounts to a potential upside of close to 21 per cent.
The brokerage is bullish on the premise that “that faster deposit accretion for HDFC Bank from a system standpoint may be achievable, while grandfathering of bank borrowings may be permitted. Unsecured share in the merged entity might remain between 11-12 per cent, as the mortgage portfolio (higher ticket size) would grow aggressively.
Standalone NIM may gradually improve (4.2 per cent in FY22), as the share of retail would rise that may also protect NIM owing to lower requirements. Opex could remain elevated over the medium term. As we slightly raise NII for FY24E/25E, our raise NII ( net interest income) for FY24E/25E, our PAT increases by an average 2.5 per cent. Hence we raise SOTP based target price from Rs 1,740 to Rs 1,800 basis September 2024 core ABV but maintain ‘buy’”, notes the brokerage.
Further, the brokerage asserts that HDFC Bank can easily realise around 25 per cent market share in incremental system deposits over the medium term, to fund organic growth and liability maturity of HDFC. This is given the bank’s constant branch focus on garnerin term deposits (TDs), higher productivity from existing branches and targeted branch expansion of 1,000-2,000 per annum.
“Historically, the bank has touched an incremental market share in TD of 42 per cent in FY18, 21.5 per cent in FY20 and 26.1 per cent in FY22. In Q1FY23 bank already added Rs 600 billion in TD”, added the brokerage.
The brokerage on the risk to NIM says that any drag in PSL even after purchasing PSLC would entail investment in NABARD/SIDBI bonds which yields only 3-3.5 per cent causing a 10-15 bps drag in NIM. Nonetheless it adds after iInteraction with banks suggest that this cost may be recovered through pricing adjustments in other products.
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