HDFC Bank is revamping some parts of its top management as the bank seeks to drive growth in mortgages, where Arvind Kapil will get exclusive charge and optimise branch ramp-up where responsibilities will be split geographically. IT and Digital also get a needed direct reporting to CEO. Ramp-up of deposits and housing book will be key to growth and investor comfort, according to Jefferies. Jefferies has maintained its ‘Buy’ rating on the stock with a 33% upside target of Rs 2,030.
Jefferies recently had interactions with the management of HDFC Life and HDFC AMC, two listed subsidiaries of HDFC Bank. “Our interactions indicate that HDFC Bank is growing flows as well as wallet share for them. There is also better integration towards adding branch and sales staff. Hence by the end of FY24e, subs may see 10-15ppt YoY rise in wallet share. These will support growth for the two subs (8% of SOTP) and fees for the bank. BUY stays,” stated the report.
The Bank’s gross advances aggregated to approximately Rs 23,545,00 crore as of September 30, 2023, a growth of around 57.7% over Rs 14,933,00 crore as of September 30, 2022 and a growth of around 44.4% over Rs 16,300,00 crore as of June 30, 2023. Grossing up for transfers through inter-bank participation certificates and bills rediscounted, the Bank’s advances grew by around 60% over September 30, 2022 and around 43% over June 30, 2023, according to regulatory filings on the NSE.
Jefferies, however, cautioned that “the risk is from a spike in rates as HDFC Bank now has a higher share of non-retail funds and its cost of funding will be more linked to market rates, than in the past. Also a slower than expected ramp-up of priority sector loans through the Commercial and Rural Banking Division would drag margins & ROA as it would lead to higher cost of compliance towards priority sector loans.”