HDFC Bank: Deposit mobilisation is the key
Financial Express Mumbai|April 18, 2023
Bank is making strong investments in branch expansion and hiring
HDFC Bank: Deposit mobilisation is the key

HDFC BANK'S FOURTH QUARTER fiscal year 2023 (Q4FY23) PAT missed estimates by 2.4%, and there was a 4.9% miss in operating profit. The need to increase deposit mobilisation, in which HDFC Bank has outperformed its peers, is causing a drop in loan-to-deposit ratios (LDRs), which is putting pressure on net interest margin (NIM). Additionally, the bank is making aggressive investments in branches and employees, which is affecting the cost/income ratio. These investments are necessary and will likely result in slower EPS growth in the short term, but they should strengthen HDFC Bank's position among its peers in the medium to long term. We have revised our PAT estimates downward by 4.0/4.3% for FY24/25e to account for a more moderate NIM and a higher cost/income ratio. Nonetheless, we maintain our preference for HDFC Bank as a preferred stock in the banking sector.We value the stock at 2.9x FY25e BVPS and raise the TP to 1,930, retaining our Buy rating.

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