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HDFC Bank stock jumps post Q2; should you buy?

Shares of HDFC Bank rose early Monday as the lending major posted a 21 per cent year-on-year rise in net profit for the quarter to September.

The figure stood at Rs 5,005.73 crore as against Rs 4,151.03 crore in the same quarter last year.

The scrip was 1.38 per cent up at Rs 1,993 at around 9.30 am while the BSE Sensex was up 0.38 per cent at 34,445.

“HDFC Banks results were in-line with expectations, with much stronger operating parameters seen as compared to the recent past. Strong advances growth but stable asset quality are clear standouts. Net interest margins (NIMs) were helped by capital raise, but also by strong CASA traction. HDFC Bank has a cushion of around Rs 1,450 crore of floating provision, with healthy capitalisation levels. We find valuations attractive for HDFC Bank. We have a BUY rating on the stock,” said Lalitabh Shrivastawa, Assistant Vice-President – Research, Sharekhan.

The bank's total income for the quarter under review stood at Rs 28,215.2 crore, up by 21.20 per cent from Rs 23,276.2 crore for the same quarter last year.

Net interest income (interest earned less interest expended) for the period jumped by 20.6 per cent to Rs 11,763.4 crore, from Rs 9,752.1 crore in the year-ago period, driven by asset growth and net interest margin of 4.3 per cent.

Provisions and contingencies for the quarter came in at Rs 1,820 crore as against Rs 1,476.2 crore a year ago.

Motilal Oswal Financial Services is also bullish on HDFC Bank with a target price of Rs 2,400. “HDFC Bank has been consistently gaining market share across retail product segments, and the recent capital raise should enable it to sustain this growth momentum. Operating expenses have been under control and several digital initiatives have led to a consistent decline in the C/I ratio to around 40 per cent. We slightly increase our FY19/20 PAT estimates on the back of improving business momentum,” it stated.

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