Is it the right time to buy HDFC Bank? Gurmeet Chadha answers

economictimes.indiatimes.com:

«The key to watch for bank in my view is that two things — how can they ramp up the liability growth which they have been doing, so last year they did 21% liability growth which is what is needed,» says Gurmeet Chadha, Complete Circle Consultants.Your sense as far as the HDFC numbers are concerned. The profitability is quite decent at Rs 11,950 crore, NII in line at Rs 23,600 crores though there is a slight deterioration when it comes to the asset quality.I think one word steady.

As always, rarely I have seen very negative surprises from HDFC since the time we have been tracking and it has been reasonable, I mean compared to the way other banks and Bank Nifty scaled up, the combined entity probably now trades at 14-15 times FY25 EPS. Also, I think once the merger goes through, this concern on are we getting shrink and NIM compression, high LDR which is almost at 110% at the time of merger, I think gradually will get addressed.

The key to watch for bank in my view is that two things — how can they ramp up the liability growth which they have been doing. So last year they did 21% liability growth which is what is needed.

If you see last eight-nine years they have been clocking high deposit rate than the industry, gaining market share. I mean if they can do that courtesy the branch expansion they have done in the last few years, a lot of the bank’s branches are now maturing and second is how quickly they can grow the loan book because apparently on the mortgage book they had an understanding with HDFC Limited.

So, I think now they can write more mortgage which also changes the overall mix of the loan book. I think these are the two things I will watch out more closely.Of course, the big question for now remains the synergy