Analyst's Pick: HDFC BANK

RESEARCH: MACQUARIE
RATING: OUTPERFORM
CMP: Rs 835
Macquarie maintains `Outperform’ rating on HDFC Bank. The business of the bank remains stable, and the strong deposit base gives the bank the flexibility to move across product lines while keeping profitability intact. The valuation, at 2.2x PBV, is at the lower end of the stock’s historical ranges. The integration with Centurion Bank of Punjab is complete , with the erstwhile CBOP branches moving to a common core banking platform on 26 January. Macquarie revises its loan growth estimates downward on management’s reaffirmation that growth will slow on market share gains given the uncertainty in the environment. On the other hand, CRR cuts and sharply falling deposit costs are offsetting these factors - and savings deposits have started to grow. There are no shocks in asset quality - incremental delinquency and credit losses are likely to remain reasonably stable from here on. Incrementally, the portfolio that is showing stress is the SME book, both in the HDFC Bank-originated book and the erstwhile CBOP book. In the medium term, credit quality should improve given the current focus on large corporate loans.
Source: ET