HDFC Bank stands out as a preferred choice given the potential for superior growth compared to the industry average and consistent profitability, Pranav Gundlapalle, Senior Analyst-India Financials at Bernstein, said in a conversation with CNBC-TV18.

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"If one assumes 13-14% system growth, the bank should head to 17-18% growth in terms of asset base and their RoA remains largely stable that should drive a similar earnings growth for them,” he explained.

HDFC Bank Wednesday reported a nearly 58% jump in advances to Rs 23.54 lakh crore as of September 30, 2023, from Rs 14.93 lakh crore in the same quarter last year. Deposits climbed close to 30% to Rs 21.73 lakh crore over last year.

Gundlepalle said there were apprehensions regarding deposit growth following previous management indications of a shift from deposits to borrowings. But the latest numbers indicate, “The bank is well set to surprise on the upside rather than the downside. 18-18.5% growth in deposits came in as a pleasant surprise,” he said.

He expects the bank to "quickly come back to their long-term range of 1.9-2.1% return on assets (RoA)."

Historically, the bank has captured an additional 60-80 basis points (bps) of market share each year, he noted.

Also Read | HDFC Bank to launch revamped app, website next year: Report

He said many banks have experienced a rerating due to factors such as the credit cycle and exceptionally strong earnings growth, and this trend has largely played out for both public sector and smaller private sector banks. Bernstein's top preference is for banks with a significant potential for multiple expansion, and HDFC Bank fits that description, he said.

HDFC Bank is undergoing a restructuring of certain aspects of its senior management in an effort to boost its mortgage business. This move comes three months after the bank's acquisition of another financial institution. The bank communicated these changes to its employees through a memo issued on Sunday, as reported by individuals familiar with the situation who preferred to remain anonymous when discussing confidential information.

He also shared his views on the non-banking finance space. He expects consumer credit growth to persist, as it is a widely anticipated trend. However, the key concern for non-banking financial companies (NBFCs) at the moment, he said, revolves around the timing and extent of potential interest rate reductions.

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(Edited by : Shweta Mungre)

First Published:Oct 5, 2023 2:44 PM IST