HDFC bank numbers are nearly in line with estimates for fourth quarter of financial year 2022-23. The bank reported strong NII growth of 23.7 percent on a year on year basis at 23,351 crore, while the retail loan growth was strong rising 29.8 percent year on year and 9.75 percent on a quarter on quarter basis.
Operating profit growth came in lower at 13.8 percent year on year and declined by 2.1 percent quarter on quarter due to lower treasury income and elevated operating expenses. Nirmal Bang says "aggressive branch expansion is leading to higher opex and is likely to remain elevated in the near term as the focus is to expand the branch network." The brokerage has a Buy rating with a target price of Rs 1,958. However, the brokerage remains cautious about merger transition, which along with elevated opex and the margin trajectory would be a key monitorable going forward.
Macquarie has an outperform rating with a target price of Rs 2,110 and views the operating expense to remain elevated and savings from credit costs can be used to drive the operating expense. Another brokerage, Bernstein also has an outperform rating with target price of Rs 2,200 and says the key positives from the bank's results are healthy 21 percent growth in deposits despite system deposit growth being 10 percent and continued pace of branch additions of 630 branches in quarter taking full year additions to 1,500 branches.
UBS has a buy rating on the stock with target price of Rs. 1,900. The brokerage says the peaking of interest rate cycle and fall in incremental system LDR, could be positive this time around unlike previous cycles. CLSA says asset quality provides P&L cushion.
What has not worked for the bank in the past quarter is the rise in interest expenses. Further, cost to income ratio is the highest in 25 quarters and corporate loan growth on year on year basis is below the overall loan growth. The stock starts the session with less than 1 percent gains today.
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