Bigger, Better, Stronger! Citi super bullish on HDFC Bank post-Analyst Day, sees 45% upside

HDFC Bank share price: HDFC Bank shares in the opening trade on Tuesday (February 20) traded with gains of just 0.5 per cent, a day after the investors' meet.
 
The country's leading private sector lender noted that it is focused on long-term growth and that earnings will get better with time. Further, the lender highlighted that the problems at the bank are the result of the reverse merger with the parent company, HDFC. Additionally, liquidity at the bank has improved to an extent, and amid the crunch, the bank will not focus on high-cost deposits.
 
HDFC Bank's management also mentioned that it will continue to invest in bank branches, and the distribution capability at the lender will also benefit other group companies. Also, attrition was a problem at the bank, but it is gradually improving.
 
The lender's HBD Finance, the bank's lending arm, will list at the specified time. Besides, the winding down of Paytm Payments Bank can be looked upon for newer opportunities.
 
The bank also highlighted that it will focus on EPS, or earning per share, growth as against the loan growth.

How do global brokerages view HDFC Bank down the line?

Brokerage firm Citi has iterated its 'buy' on the stock with a target of Rs 2050, implying an upside of 45 per cent.

Further, some of the key takeaways of the investors' meet as assessed by the brokerage are:

i) Building a granular sustainable franchise &balanced profitable growth will be a key focus.

ii) In tight liquidity, it will not chase high-cost deposit flows. Also, it aims to maintain healthy incremental LDR (loan to deposit) & (liquidity coverage ratio or LCR).

iii) It will raise threshold lending rates to pass on increased funding costs but will maintain NIM/RoA in guided band

iv) With the latest developments at Paytm, HDFC Bank will be more sanguine on pockets of opportunities

in certain merchant segments

v) It will leverage on the group’s distribution strength and its share in third party product distribution should rise.

vi) HDB Financial is on track to timelines set for listing.