Stock Watch – HDFC Bank

HDFC Bank is the leader in private banking space.Delivering consistent and superior returns as compared to most of its peers in the industry has been the mainstay of HDFC Bank’s performance in the last couple of fiscals. Sustenance of one of the best margins, return ratios and asset quality across interest rate cycles sets the bank apart from its peers. It has grown consistently around 30% YOY for the past 25 quarters.

Positives
..One of the highest CASA (low cost deposits) and NIM in the industry.
..Robust asset quality despite strong growth in assets during last
couple of years.
..Has strong technology, expanding distribution franchise & largearray of products.


Risks

..Ripple effect of financial crisis in US & Europe
..Expensive acquisition of CBoPand prevailing integration risks.
..Downside risk arises from hard-landing of our economy
..Higher unsecured loan exposure could lead to faster deterioration
in asset quality

At current price of around 850 it trades around 16 times FY09 and 13 times FY10.Medium to Long term investors can buy the stock which can give very good returns.

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