
InCred Equities likes both HDFC Bank Ltd and ICICI Bank Ltd amid improving retail presence and focus on managing quality but, among the two, it has a preference for the most-valued banking stock, thanks to HDFC Bank's granular branch expansion and faster customer acquisition. The domestic brokerage said number of branches opened in past three years are superior in case of HDFC Bank over ICICI Bank, adding that HDFC Bank's branch presence are also far more granular than ICICI Bank's.
Customer acquired in terms of debit card issuances remain higher for HDFC Bank, it said adding that the bank has managed its market share dominance in credit card issuances and spends well. Besides, the brokerage felt cross selling opportunities in HDFC Bank mortgage customers remain high.
"We believe India financial sector is already on the path of improving financial penetration especially in Semi urban and Rural Indian geographies. This is possible only though improving ground presence (branches) and faster paced customer acquisition. We believe, HDFC Bank is relatively better placed on both these formats compared to ICICI bank which will ensure granular retail asset growth for the bank along with consistency in revenues," it said.
InCred Equities said it has liking for both large private sector banks and suggested a target price of Rs 2,000 for HDFC Bank and Rs 1,060 for ICICI Bank. It said the two banks are consistently improving their retail presence through offering diversified products, customised as per individual requirement. Both banks, it said, have set processes and formats in place, which not only enhances smooth execution but also enables the management to maintain healthy asset quality.
"However, we prefer HDFC Bank over ICICI bank amid superior ground presence and faster customer acquisition," it said.
The brokerage said HDFC Bank has added 2,213 branches across India in past two years against 634 branches added by ICICI Bank. This, it said, would provide the first mover advantage to HDFC Bank in this rural areas.
"Our analysis suggests that HDFC Bank has significantly improves their presence in Eastern and Central states of India including UP, Bihar, MP and north-eastern states which are witnessing sharp surge in organised penetration," the brokerages said.
Post recent merger with HDFC, InCred Equities said it visualises large and untapped cross-sell opportunity for HDFC Bank as far as its existing mortgage customers are concerned, which can further aid its retail growth.
"Though we do expect margin pressure during initial quarters post-merger, however we expect normalisation in earnings with RoAs at 2 per cent and RoEs at 16 per cent in coming years for HDFC Bank We like both the banks amid improving retail," it said.
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