Hdfc Bank Report

HDFC bank report:

HDFC banks PBT is Rs42.1bn for 3Q FY15. Loan growth was healthy in both wholesale and retail segments. Strong CASA growth sustained NIM while fee income further picked up. Asset quality was strong. With HDFC banks investment spending picking up, concerns on this front have been addressed, in my view. Forward our valuation based on study of annual reports for the year 2013-14 and other quarter reports, we adjust our estimates, mainly to incorporate continued strong CASA and fee growth. We reiterate our report – with increased investment spending, a strong balance sheet and a clean deposit franchise; HDFC bank is well positioned to take advantage of the pickup in the economy.

• Credit book well-diversified within retail and corporate:

The credit book is well-diversified with retail credit constituting 51% of total credit while corporate credit constituted 49%, The growth in retail credit was modest owing to sluggish credit growth in CV and business banking. Retail growth was broad-based across most segments except gold loans. Growth in key unsecured segments – personal loans and credit cards – remained healthy. Within the retail credit, CV/CE credit stood at ` 132 bn (8% of retail credit), business banking- ` 213.4 bn (13% of retail credit), auto loans- ` 400 bn (24% of retail credit), personal loans- ` 248 bn (15% of retail credit), credit card- ` 153.6 bn (9% of retail credit), home loan- ` 199.8 bn (12% of retail credit), etc.

Healthy loan growth in both wholesale and retail credit; retail growth is of  broad-base. The outstanding credit of HDFC Bank grew at a healthy pace of 17% YoY and 6.1% QoQ to ` 3470.9 bn. Overall loan growth was a healthy 18% YoY (excluding FCNR-related lending), with both domestic wholesale 16% and domestic retail 19% showing good growth, based on our estimates. The retail credit growth was modest at 11.7% YoY to ` 1648.3 bn while corporate credit grew by 22% YoY.

• Deposit growth healthy, Strong liability franchise maintained:

The deposit of HDFC Bank grew by 18.6% YoY to ` 4141.3 bn with CASA ratio of 40.9%. Although CASA ratio is gradually trending south from its usual trend of 45%, it still remains one of the best in industry.  

• CASA growth strong; fee income also picked up:

SA growth was strong (19% YoY); CA growth continued to be healthy 18%. HDFC bank has CASA growth of 18%, the best among the larger private sector banks. Although the CASA ratio declined QoQ to 41% from 43%, this was on the pickup in term deposits. The CASA/RWA ratio, which we use as an indicator of the quality of earnings, remained stable at 43%. Fee income growth further picked up 15% YoY as momentum in third-party distribution continued. Management mentioned that 90% of fees are retail-related, which continues to be best in class.