HDFC Bank share price: Jefferies maintains buy rating with price target of Rs 1,860

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Jefferies said HDFC Bank management is confident in increasing the loan market share from 10% to 15%, implying a CAGR of 18-20% over the medium term. This should not have any impact on the quality of underwriting and profitability. Jefferies maintains the buy rating on HDFC Bank with a target price of Rs 1,860. The HDFC Bank share price today is Rs 1,485, up Rs 22 or 1.5%.

At the same time, it reinforces the two main trickier problems of the bank:

(1) customer service
(2) staff attrition and accountability

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When it comes to ESG, the focus is on scalable and measurable initiatives. Jefferies earns 20% CAGR profit for fiscal year 20-23 and maintains its call to buy on HDFC Bank.

HDFC Bank is well positioned to gain market share and grow at a CAGR of 18-20%:

HDFC Bank management believes the bank is well positioned to increase its lending market share from 10% today to 15% over 5-7 years. This could imply an 18-20% CAGR of loans over this period without compromising underwriting and profitability.

HDFC Bank’s growth will be driven by:

(1) deepening presence in non-urban markets
(2) ability to take advantage of market share gains in Casa deposits with better capital
(3) growth prospects like Govt. capital spending and increased demand for retail credit

Strengthening engagement with customers and employees of HDFC Bank:

HDFC Bank Management focuses on reducing the levels and intensity of customer complaints as well as increasing the Net Promoter Score (endorsement by existing customers). This will help deepen existing relationships and acquire new customers. The Bank is also focused on increasing engagement with employees at all levels. Of the 100,000 bank employees, 10,000 are executives and in the future their goals and dashboards will involve strengthening their team members from the perspective of business growth as well as leadership. compliance and governance. Attrition levels were 16% in FY20 (former sales agents) and historically HDFC Bank has also experienced higher attrition at middle management levels. Reducing attrition can help run smoother as well as improve compliance.

Focus ESG:

When it comes to ESG, HDFC Bank focuses on scalable and measurable initiatives. The Bank has limited funding for projects having a negative impact on ozone; loans greater than ticket size and occupancy time are reviewed under the Social and Environmental Management System (SEMS). Although emissions levels are low, it still aims to reduce its emissions levels / energy intensity by 3-10% by 2022. HDFC Bank’s gender diversity ratio was 21% during fiscal year 20 and it aims to reach 24% by fiscal year 23. At the level of the board of directors, the emphasis is on the constitution of strong and independent directors and on the clear identification of roles. member specializations.

Maintain Buy on HDFC Bank:

Jefferies posts a profit of 20% CAGR in fiscal year 20-23 and an ROE of 18% in fiscal 22. Valuations at 3.5x adj P / B FY22 appear reasonable and maintain the rating of purchase with a price target of Rs 1,860 based on 3.8x adjusted PB Mar-23. Jefferies’ target price on ADR is US $ 93.

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