HDFC Financial institution delivered 10 share factors larger progress versus ICICI Financial institution over FY15-20 however now progress outcomes are both comparable or higher for ICICI, mentioned CLSA.
“ICICI’s market share in unsecured and company loans is half of HDFC Financial institution and share in SME (small and medium enterprises) loans is lower than one third of HDFC Financial institution and comparable progress assumptions suggest a neater asking fee for ICICI on progress,” mentioned CLSA.
ICICI Financial institution reported a 25% year-on-year progress in revenue for the December quarter at ₹6,194 crore and HDFC Financial institution’s revenue grew 18% within the December quarter to ₹10,342.2 crore.
The brokerage mentioned it expects asset high quality outcomes to be comparable for each banks and ICICI might have decrease credit score prices due to a decrease unsecured credit score combine in portfolio.
ICICI Financial institution’s web non-performing belongings ratio fell to 0.85% within the December quarter from 0.99%. Gross NPAs fell 69 foundation factors sequentially to 4.13% on the finish of the December quarter. For HDFC Financial institution, gross NPA fell 9 foundation factors sequentially to 1.26% within the December quarter whereas web NPA ratio fell 3 foundation factors to 0.37%.
CLSA mentioned given HDFC Financial institution’s dimension, it’s going to want extra engines for robust progress past retail equivalent to SME and industrial.
“The SME Share for HDFC Financial institution is 13-15% and continued robust progress and profitability right here shall be key to sustaining multiples,” it mentioned.
Shares of ICICI Financial institution ended up 0.86% at ₹736.50 on Friday whereas these of HDFC Financial institution ended up 2.47% at ₹1,506.30.
CLSA mentioned ICICI Banks’ valuation hole to HDFC Financial institution is now at a decadal low of 20%, inside a good valuation hole vary.
“The valuation hole at 20% now could be truthful and our goal worth multiples additionally suggest a 18-20% hole. We don’t anticipate HDFCB to underperform materially,” mentioned CLSA.