HDFC Bank, India's second largest private bank, has grown its balance sheet at 23% CAGR to Rs 4,000 billion over FY07-13 maintaining its profit growth of 30% CAGR to Rs 67.26 billion. However, in FY14, PAT growth has moderated to 26% at Rs 84.78 billion with future expectations toned down to 22%.

The bank rarely chased business size but enjoys best margin and asset quality in the business segment it operates i.e. retail loans in CV/CE, credit cards, etc. It has 47.5% retail and 52.5% wholesale corporate loan book totalling Rs 3,470.88 billion as on December 2014. Within retail, it is diversified with 24% in auto, 8% in CV/CE, 15% personal loans and 13% in business banking. It enjoys largest market share in credit cards in industry at Rs 153.64 billion book, which generally fetches higher margins and returns for a bank. The bank's acquisition of Centurion Bank in FY08 also helped strengthen its retail book.

Commenting on the same, ICICIdirect said, "We expect it to continue slightly higher credit and deposit growth of 18% in FY15E. However, profit growth is likely to maintain consistency. We expect NIM to range at 4.3-4.4% in FY15E and FY16E. CASA and fee based income (cross selling), higher retail loans will continue to grow on rising presence in remote locations. 

Considering the superior quality of balance sheet and stable management, we factor in 18.9% CAGR in NII, 20.9% in PAT over FY14-17E. It carries healthy floating provision providing comfort. Trading at 3.7x for one year forward P/ABV, it is at a premium and justified over the long term. The bank remains a portfolio stock."

ICICIdirect has maintained 'Hold' on HDFC Bank with price target of Rs 1,160 as against current market price (CMP) of Rs 1066.

Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.