HDFC BANK - Underrated BlueChip Bank Stock

HDFC Group is super conservative - A good thing for lower-risk tolerant investors. The Bank is Poised to retain its steady state i.e its deviation (performance-wise) from the Mean will be lesser in case of economic turmoil.

So, what makes a it worthy of a purchase consideration?

This is super important to note as over the past 4 years, the price has been cyclical but the PAT has consistently compounded in lower double digits in the same period.

This seems to be a clear mispriced situation. I consider a trade in this scrip to be opportunistic with fundamental support ( limited downside ) Currently this is suitable for short-term as well as long term. In the near future ( 6 months ) - Rs.1945 seems achievable to me. And in the long term, it should comfortably compound at or over NIFTY 50’s rate.

Notes from ConCall:

1. Focus on profitability metrics with a medium to long-term view

2. It will gradually tap into operational strength by utilizing improved technology and digital infrastructure

3. Corporate Segment has shown degrowth because of lower expected yields. HDFC focuses on higher quality clients that aren’t as price sensitive.

4. Reserves are being stockpiled in anticipation of E-bonds repayment.

(2) HDFC bank has been a laggard when it comes to adoption of digital systems and processes for retail banking. However, there is a notable turnaround underway with the introduction of their new netBanking Portal ( in phases ) for consumers that’s more modern + swift and also the simultaneous push of Xpressway aka Insta-services. This is essentially DIY for raising Service requests that typically required a banker's intervention earlier with offline KYC, physical paperwork and visit to the branch/door-step banking.

Xpressway debuted in Q3 FY24 and is slowly becoming default and unoptional in Tier-1 cities as of Q1 FY25.

I’m convinced this forced adoption will categorically alleviate operations challenges and reduce costs and TAT. Xpressway uses Debit cards linked to the account as the focal point of request authentication apart from OTPs. DBs are replaced by NetBanking credentials in some operations, while others require both at different stages.

HDFC is the first large bank to completely digitize the Name addition process to an account to convert single holder to joint holder.

(3) HDFC has always been the pioneer for corporate banking. C-suite execs across the board vouch for their Services and claim it’s are unparalleled. For Example: The admin control panel for corporate credit cards issued.

(4) These floating provisions have come from One-off transactions like tax WriteBack and the sale of Credalia - Their Education loan product.