HDFC Bank Q4 Results Review - Net Interest Margins Improved Slightly; Guided RoA To Sustain: IDBI Capital

IDBI Capital Report

HDFC Banks Ltd. net interst margin improved by 4 basis points QoQ to 3.44% led by increase in yields while cost of funds remained flat. Further, management guided for NIM attrition will be function of high rate bonds replacement with deposits.

Deposits grew by 7.5% QoQ (merged basis) led by retail term deposits while gross advances grew by 1.6% QoQ (merged basis) led by CRB book.

HDFC Bank's asset quality remained stable as gross non-performing asset stood at 1.29% versus 1.26% QoQ (merged basis).

Net interest income grew by 2% QoQ while pre-provision operating profit grew by 24% QoQ due to higher other income. Profit after tax grew by 1% QoQ led by negative tax rate.

We have downgraded FY25E/FY26E estimates (down 6%/5% respectively) led by lower loan growth and stable margins. We maintain Buy rating with the target price of Rs 1,872 (earlier Rs 2,090) valuing parent business at Rs 1,694 (2.2 times price/adjusted book FY26 earlier 2.5 times as margin improvement to be seen).

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