Post the reporting of strong operating numbers for the quarter ended June, Goldman Sachs expects HDFC bank to outperform in comparison to the Bankex. The healthy operating performance is on the back of improving NIMs, growth in fee income as well as lowest cost to income ratio of 350 bps on a year-on-year basis.
So, the investment bank is of the view that bank is set to hit a $100 billion market capitalization by the year FY20.
The report says "We think the stock's premium valuation can be sustained given high visibility into strong earnings growth from (1) market share gains and rising penetration in retail lending". Also, growth in fee income as well as strong lending profitability on both loan mix and CASA franchise in addition to better employee and branch productivity are some other factors that shall go well with the private sector lender.
The loan growth increased 5% on a quarterly basis on the back of continued gain in market share while it mounted to a six-quarter high figure of 23% on a yearly basis.
For other products including credit cards, personal loans, business banking, the bank reported strong growth of 37%-58% on an yearly basis.
"We see HDFC Bank market cap rising to above US$100bn by FY20 on the back of a 23 percent FY17-21E EPS CAGR", says the investment banker. The i-banker gives a buy call for the bank and puts forth a target price of Rs. 2,208 that means an upside potential of 17%.