HDFC Bank delivered steady performance for Q1FY19, with PAT growth of 18.2% yoy. On the operating front, the bank reported 15.4% yoy growth in NII, however, the numbers disappointed on NIM front. NIM declined by 20bps on a sequential basis to 4.2%. The bank managed to reduce its expenses and brought down the cost/income ratio from 41.7% in 1QFY18 to 40.9% in 1QFY19.

Outlook & Valuation: Credit growth beat the industry growth rate, driven by strong retail business. The Strong liability franchise and healthy capitalisation provides strong earning visibility. At the current market price, the bank is trading at 3.6x FY20E ABV. We recommend a Buy rating on the stock, with a target price of `2,350/-.

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