shares of HDFC bank The stock hit a record high on the BSE in early trade on Monday as the stock was trading up nearly 2% at Rs 1,715 per share. The private lender on Saturday reported a 17% year-on-year growth in net profit for the second quarter of FY12 ₹8,834 crore as compared to ₹7,513 crore during the same quarter last year.
Analysts at Motilal Oswal say HDFC Bank continues to witness strong business growth vis–vis its peers, resulting in increased market share. This was led by a healthy pickup in retail, while commercial and rural banking remains strong.
The brokerage said earnings were in line despite making additional contingency provisions to strengthen its balance sheet. “The high provision coverage and contingency provision buffer provide comfort on asset quality. Increase in credit growth will particularly aid retail NII and margins which will boost profitability,” Motilal Oswal notes. It has maintained its buy rating on the stock with revised target price. ₹2,000 per share.
HDFC Bank’s asset quality improved on a sequential basis, with gross non-performing assets ratio at 1.35%, as against 1.47% as on June 30. The net NPA ratio also fell 8 basis points quarter-on-quarter to 0.4%. By increasing the total provision for the bank ₹3,925 crores.
People at ICICI Securities also maintained a ‘Buy’ rating on the stock of India’s largest private lender. They have also raised the target price ₹before 1,955 ₹1,818.
“Demand resolution is back to pre-Covid levels and the recovery is encouraging. The bank is building digital and franchise capabilities to take advantage of the growth opportunities. Cumulative provisioning equals 2.2% upfront against 2.9% stress pool,” ICICI Securities note said. This elevated restructured pool, however, sees unfavorable behavior of continued investment, which will keep OPEX higher as key risks.
HDFC Bank’s total provisions for the bank increased on a year-on-year basis but decreased on a sequential basis: ₹3,925 crores.
Nirmal Bang said in a note on the bank that lower provisioning aid income while retail growth would pick up. “Balance sheet capitalization remains strong with a Tier-I ratio of 18.7%. We remain optimistic about the Bank’s growth prospects as it is taking several measures to capture emerging opportunities in commercial/rural and retail banking. We maintain BUY on stock with TP of ₹1,962.”
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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