Jefferies said that management of HDFC Bank was confident of expanding market share in loans from 10% to 15%, implying 18-20% CAGR over medium term. This shouldn't impact underwriting quality & profitability. Jefferies maintains Buy rating on HDFC Bank with a price target of Rs 1860. HDFC Bank share price closed at Rs 1491, up Rs 28 or 1.9% and ICICI Bank closed at Rs 578.55, up Rs 7 or Rs 1.2%.

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At the same time, it is strengthening bank's two key softer issues:s

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

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

HDFC Bank’s Management believes that the bank is well-placed to expand market share in loans from 10% now to 15% over 5-7 years. This could imply 18-20% CAGR in loans over this period without compromising on underwriting and profitability.

Sharekhan interacted with the ICICI Bank management wherein it highlighted that it remained committed to sustainable growth with a sharp focus on core profitability supported by a healthy asset quality position. The loan growth is expected to pick-up gradually through Q4 and FY22E, and we expect the trend of lower asset quality pressure (on an incremental basis) to continue. The bank expects NIMs to stay steady with an upward bias (supported by loan growth, lower slippages and interest reversals drag) for the medium term.

Sharekhan believes that the competitive intensity notwithstanding, ICICI Bank may be able to offset the same through a calibration in its loan mix towards better yielding products, higher loan-to-deposit ratio and also better than ever liability franchise. While segments (like retail. mortgages etc) continue to see high competitive intensity, but given ICICI Bank’s strength of franchise, its likely to sustain its growth. The retail backed robust liability franchise of ICICI Bank, with CASA at 42% places it well in terms of low cost of funds.

Sharekhan believes that improved economic growth (helped by a progressive and growth oriented government policy and Union Budget) are positives for the banking sector, and strong players like ICICI Bank are well-placed to benefit from it. Sharekhan maintains a Buy rating on ICICI Bank with an unchanged SOTP-based price target of Rs 770.