The share price of HDFC Bank rallied over 2 percent to hit a fresh 52-week high of Rs 1,500 apiece on Monday after the bank reported strong earnings for the quarter ended December 2020, beating street estimates.

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HDFC Bank reported an 18.1 percent growth in net profit during the third quarter of fiscal 2021 at Rs 8,758.3 crore as against Rs 7,416.5 crore in the same quarter of the previous fiscal. CNBC-TV18 poll had estimated a profit of Rs 8,264.8 crore.

Net interest income during the quarter grew by 15.1 percent to Rs 16,317.6 crore from Rs 14,172.9 crore in the corresponding period, driven by advances growth of 15.6 percent, and a core net interest margin for the quarter of 4.2 percent.

The pre-provision operating profit (PPOP) rose 17.3 percent YoY to Rs 15,186.0 crore in Q3FY21.

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HDFC Bank Q3 results

Provisions and contingencies for the quarter ended December 2020 were Rs 3,414.1 crore (consisting of specific loan loss provisions of Rs 691.2 crore and general and other provisions of Rs 2,722.9 crore) as against Rs 3,043.6 crore (consisting of specific loan loss provisions of Rs 2,883.6 crore and general and other provisions of Rs 159.9 crore) for the quarter ended December 2019.

Total provisions for the current quarter included contingent provisions of approximately Rs 2,400 crore for proforma NPA, said the bank.

Asset quality of the bank improved as the gross non-performing assets (NPA) declined 189 bps to 0.81 percent of gross advances while net NPA fell 8 bps to 0.09 percent of net advances as of December 2020.

The restructuring under the RBI resolution framework for COVID-19 was approximately 0.5 percent of advances, said the bank.

Global brokerage CLSA said that HDFC Bank’s Q3FY21 results were strong and with pro-forma slippages of just Rs 5,000 crore (1.9% of loans equivalent) even after 4 months of debt servicing (post moratorium) indicating that the portfolio has been pandemic-proof.

Retail disbursements are now up double digits and will lead to a recovery in retail growth, it said.

CLSA increased its earnings estimates further by 4-6 percent and now expects an almost normalised year with 18 percent YoY PAT growth in FY21CL and around 18-20 percent earnings Cagr over FY21-23CL.

The brokerage reiterated a 'Buy' rating on HDFC Bank and increased its target price on the stock to Rs 1,825 per share from Rs 1,725 implying 3.5x FY23 book and 22x FY23 earnings.

“HDFC Bank’s asset quality underscores our view that FY22 could be a dual benign credit cycle for corporate and retail loans,” CLSA said.

Yes Securities retained a 'Buy' call and raised the target price to Rs 1,870 per share. The brokerage house also revised FY21/22/23 earnings estimates by 10%/3%/4% respectively

“The stand-alone bank trades at 2.8x P/ABV and 16x P/E on FY23 estimates, adjusted for the valuation of its holdings in HDB Financial and HDFC Securities. Valuation is palatable and can move higher as it stands just above the long-term mean on 1-yr rolling fwd. basis and the probability of 20% earnings CAGR over FY20-23 has improved substantially. Also, the bank trades at a significant discount to KMB despite better growth delivery,” Yes Securities said.

At 9:55 am, the shares of HDFC Bank were trading 2.00 percent higher at Rs 1,495.85 apiece on the BSE as compared to a 0.52 percent loss in the benchmark Sensex.

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