HDFC Bank: Healthy Operational Performance Justifies Premium
HDFC Bank: Healthy Operational Performance Justifies Premium
HDFC Bank: Healthy Operational Performance Justifies Premium
Result Update
at 35.5% YoY to | 6669 crore, led by 24% YoY growth in fee income &
treasury income of | 940 crore. Led by healthy growth in NII and other
income, PPP came in at | 12945 crore, up 20% YoY. However, provisions Particulars
continued to remain elevated at | 3043 crore, consisting of ~| 2884 crore of Particulars Amount
specific provision. Healthy operational performance coupled with reduction Market Capitalisation | 690105 crore
GNPA (Q3FY20) | 13427 crore
in tax rate led to healthy 32.8% YoY growth in earnings to | 7416 crore.
NNPA (Q3FY20) | 4468 crore
Advances growth came in healthy at 19.9% YoY to | 936030 crore. Traction NIM % (Q3FY20) 4.2
in the retail book remained slower at 14% YoY, primarily led by subdued 52 week H/L 1304/1011
growth in the auto book while growth in unsecured book (personal and Networth | 163591 crore
Face value |2
credit cards) was healthy at ~25% YoY. Corporate book grew at a faster rate
DII holding (%) 20.9
at 27% YoY, offsetting a moderation in retail book. Deposit growth was
FII holding (%) 37.9
healthy at 25% YoY to | 1067433 crore, led by strong growth of ~28% YoY
in term deposit. CASA saw higher growth compared to the previous quarter
Key Highlights
leading to ~20 bps uptick in CASA ratio sequentially to 39.5%.
Earning outperformance largely
Asset quality continued to remain steady with GNPA at | 13427 crore and
attributable to robust other income
GNPA ratio at 1.42%, up 4 bps QoQ. Marginal pressure was witnessed in the
growth
auto book, though currently it is not a major concern. Overall slippages
Among large subsidiaries, for HDB Financial, growth continues to remain Maintain our BUY recommendation
slower, as AUM grew ~15% YoY to | 59178 crore. Stage 3 GNPA ratio with revised target price of | 1550
remained steady at ~3%, led by pressure in commercial vehicle segment. (earlier | 1440)
PPP 12,945.4 12,380.1 10,778.4 20.1 11,698 10.7 PPP beat on back of higher other income
Slippages came in higher at | 3839 crore. Further, the bank
Provision 3,043.6 2,988.8 2,211.5 37.6 2,700.7 12.7
has made specific provisions of | 2884 crore
PBT 9,901.9 9,391.3 8,566.9 15.6 8,997.4 10.1
Tax 2,485.4 2,441.7 2,981.0 -16.6 2,652.4 -6.3
PAT 7,416.5 6,949.6 5,585.9 32.8 6,345.0 16.9 PAT trajectory maintained largely due to robust other income
Key Metrics
Slippages came in higher at | 3839 crore including | 700
GNPA 13,427.3 13,208.2 10,902.9 23.2 12,508.2 7.3
crore from corporate sector
NNPA 4,468.4 4,191.0 3,301.5 35.3 3,791.0 17.9
Total Restructured assets 898.6 861.1 749.7 19.9 861.1 4.4
Corporate book grew 27% YoY while slowdown in auto kept
Advances 936,030 934,000 780,951 19.9 896,984 4.4
retail advances growth at 14% YoY
CASA ratio improved ~20 bps QoQ to 39.5%, led by higher
Deposits 1,067,433 1,067,500 852,502 25.2 1,021,615 4.5
accretion in savings deposit
Source: Company, ICICI Direct Research
Exhibit 3: Assumption
Current Earlier
FY19 FY20E FY21E FY22E FY20E FY21E
Credit growth (%) 24.5 20.0 20.5 22.0 19.0 20.8
Deposit Growth (%) 17.0 21.0 21.6 22.4 16.9 19.2
CASA ratio (%) 42.4 40.0 38.7 37.4 41.3 40.9
NIM Calculated (%) 4.4 4.4 4.2 4.1 4.5 4.5
Cost to income ratio (%) 39.7 38.6 38.8 38.4 38.4 38.3
GNPA (| crore) 11,479 14,723 17,567 21,614 13,820 15,586.5
NNPA (| crore) 3,745 4,209 4,778 6,344 4,510 4,763.2
Slippage ratio (%) 1.1 1.0 1.0 1.0 1.0 0.9
Credit cost (%) 0.9 1.1 0.9 0.8 0.9 0.8
Source: Company, ICICI Direct Research
Story in Charts
Exhibit 4: Momentum in NII growth continues
16000 30
14000 25
12000
10000 20
(| Crore)
8000 15 (%)
6000 10
4000
2000 5
0 0
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q2FY19
Q3FY19
Q4FY19
Q1FY20
Q2FY20
Q3FY20
NII NII growth YoY (RHS)
-5
FY18
FY19
FY20E
FY21E
FY22E
Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q2FY19
Q3FY19
Q1FY20
Q2FY20
Q3FY20
Overall slippages came in at | 3839 crore with |1500 crore being lumpy, |
600-700 crore from a stressed corporate and 60-65% slippages came from
agri book. The bank holds floating provision at | 1450 crore.
Exhibit 7: CASA ratio inches up ~20 bps QoQ…. Exhibit 8: Continued focus on branch expansion
1100000 46
1000000 Q3FY20 5345 14533
44 43 44 Q2FY20 5314 13514
900000 43
800000 42 42 42 Q1FY20 5314 13514
700000 41 40 40 40 Q4FY19 5103 13160
39 39 40
(| Crore)
FY19
FY20E
FY21E
FY22E
Q2FY18
Q3FY18
Q1FY19
Q2FY19
Q3FY19
Q1FY20
Q2FY20
Q3FY20
Q1FY18 4727 12220
100 2100 4100 6100 8100 10100 12100
Saving Current Term CASA (RHS) Branches ATM
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research
Exhibit 9: Margin to see marginal pressure ahead Exhibit 10: Best in class asset quality maintained
5.0
FY20E
FY21E
FY22E
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q2FY19
Q3FY19
Q4FY19
Q1FY20
Q2FY20
Q3FY20
3.6
FY19
Q4FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q2FY19
Q3FY19
Q1FY20
Q2FY20
Q3FY20
FY20E
FY21E
FY22E
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research
21.0 18.5
19.0 17.1 17.3 17.1 17.5 17.5
17.0 15.5 15.5 15.4 15.9 15.6 15.1 15.5
14.8 14.6
14.6
15.0 17.1
(%) 13.0 15.6 15.8 15.8 16.2 16.2
11.0 13.2 13.3 13.3 13.8 12.8 13.6 13.3 13.6 13.2
9.0 11.0
7.0
5.0
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q2FY19
Q3FY19
Q4FY19
Q1FY20
Q2FY20
Q3FY20
CAR Tier 1
(| Crore)
2000 4000
1000 ` 3000
2000
0 1000
-1000 0
Q4FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q2FY19
Q3FY19
Q4FY19
Q1FY20
Q2FY20
Q3FY20
Commission Forex Revaluattion of Investment Total (RHS)
1.5 15.0
1.0 10.0
0.5 5.0
1.45
1.57
1.68
1.82
1.90
1.89
1.85
1.81
1.81
1.97
1.97
2.08
2.14
0.0 0.0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
RoA % RoE %
0 88.0
Sep-17
Sep-18
Sep-19
Dec-17
Dec-18
Dec-19
Feb-17
Feb-18
Feb-19
Jan-19
Jan-20
Jan-17
Jan-18
Jun-17
Jun-18
Jun-19
Oct-17
Oct-18
Oct-19
May-17
Jul-17
Jul-18
Jul-19
May-18
May-19
Aug-17
Nov-17
Nov-17
Aug-18
Nov-18
Aug-19
Nov-19
Mar-17
Mar-18
Mar-19
Apr-17
Apr-18
Apr-19
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICI Direct Research
Financial summary
Exhibit 17: Profit and loss statement | crore Exhibit 18: Key Ratios
(Year-end March) FY19 FY20E FY21E FY22E (Year-end March) FY19 FY20E FY21E FY22E
Interest Earned 98972 115895 136539 162280 Valuation
Interest Expended 50729 59932 73374 89245 No. of Equity Shares 544.7 544.7 544.7 544.7
NII 48243 55963 63165 73036 EPS (|) 38.7 49.3 61.9 76.1
Growth (%) 20.3 16.0 12.9 15.6 BV (|) 273.9 313.4 362.9 407.0
Non Interest Income 17626 22662 28758 36837 ABV (|) 267.1 305.6 354.1 395.4
Fees and advisory 13806 17947 23331 30331 P/E 33.2 26.1 20.8 16.9
Treasury Income 387 464 557 669 P/BV 4.7 4.1 3.5 3.2
Other income 3433 4251 4870 5837 P/ABV 4.8 4.2 3.6 3.3
Total Income 65869 78626 91923 109872 Yields & Margins (%)
Employee cost 7762 8735 10003 11501 Net Interest Margins 4.4 4.4 4.2 4.1
Other operating Exp. 18358 21628 25667 30665 Yield on avg earning assets 9.0 9.0 9.1 9.1
Gross Profit 39750 48263 56254 67706 Avg. cost on funds 5.2 5.3 5.4 0.0
Provisions 7550 10989 11003 12039 Avg. cost of deposits 5.1 5.2 5.3 5.4
PBT 32199 37274 45251 55667 Yield on average advances 10.5 10.4 10.3 10.3
Taxes 11121 10437 11539 14195 Quality and Efficiency (%)
Net Profit 21078 26837 33712 41472 Cost / Total net income 39.7 38.6 38.8 38.4
Growth (%) 20.5 27.3 25.6 23.0 Credit/Deposit ratio 88.8 88.0 87.2 86.9
EPS 38.7 49.3 61.9 76.1 GNPA 1.4 1.50 1.48 1.50
Source: Company, ICICI Direct Research NNPA 0.5 0.43 0.40 0.44
ROE 16.5 16.8 18.3 19.8
ROA 1.8 2.0 2.1 2.1
Source: Company, ICICI Direct Research
Exhibit 19: Balance sheet | crore Exhibit 20: Key ratios (%)
(Year-end March) FY19 FY20E FY21E FY22E (Year-end March) FY19E FY20E FY21E FY22E
Sources of Funds Total assets 17.0 18.6 19.4 19.8
Capital 545 545 545 545 Advances 24.5 20.0 20.5 22.0
Reserves and Surplus 148662 170131 197101 221155 Deposits 17.0 21.0 21.6 22.4
Networth 149206 170676 197646 221699 Total Income 22.1 18.8 19.3 20.5
Deposits 923141 1116849 1358369 1663160 Net interest income 20.3 16.0 12.9 15.6
Borrowings 117085 125887 135479 145911 Operating expenses 15.1 16.2 17.5 18.2
Other Liabilities & Provisions 55108 62333 70700 80412 Operating profit 21.8 21.4 16.6 20.4
Total 1244541 1475745 1762193 2111182 Net profit 20.5 27.3 25.6 23.0
Net worth 40.4 14.4 15.8 12.2
Applications of Funds EPS 14.9 27.3 25.6 23.0
Source: Company, ICICI Direct Research
Fixed Assets 4030 4209 4414 4649
Investments 290588 317275 349938 388374
Advances 819401 983066 1184790 1445386
Other Assets 49174 81988 124773 163999
Cash with RBI & call money 81348 89207 98277 108774
Total 1244541 1475745 1762193 2111182
Source: Company, ICICI Direct Research
RATING RATIONALE
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stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock
Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%
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