HDFC Bank 4Q FY 2013

4QFY2013 Result Update | Banking
April 23, 2013
HDFC Bank
Performance Highlights
Particulars (` cr) NII Pre-prov. profit PAT 4QFY13 4,295 2,963 1,890 3QFY13 3,982 3,121 1,859 % chg (qoq) 7.9 (5.1) 1.7 4QFY12 3,561 2,527 1,453 % chg (yoy) 20.6 17.3 30.1
NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Banking 164,087 0.9 705/482 174,119 2 19,179 5,837 HDBK.BO HDFCB@IN
`689 -
Source: Company, Angel Research
HDFC Bank delivered yet another quarter of consistent performance on the bottom-line front, with a growth of 30.1% yoy. On the operating front, while the growth in NII came in relatively lower at 20.6% (similar to last quarter), the non-interest income grew only by a moderate 10.7%, leading to a growth of around 17% yoy in both operating income and pre-provisioning profits (on a like-to-like basis, post the accounting reclassification). On the asset quality front, the bank reported stability, as its Gross and Net NPA levels, on an absolute basis, came down sequentially by around 4-5% each, which aided it to report 27% yoy lower provisioning expenses and clock earnings growth of 30% yoy. Balance sheet growth robust; Asset quality stable: The bank registered a robust growth in its balance sheet, with net advances and deposits growing at 22.7% and 20.1% yoy. Within its loan book, the bank managed to grow its retail advances by 27.3% yoy; hence, the share of retail advances to overall loan book increased by around 200bp yoy and 300bp qoq to 56.9%. Within the retail loan portfolio, a strong buildup was witnessed in Business banking, Personal loans and Credit card loans, as these portfolios grew by 31.5%, 26.0% & 45.3% yoy respectively. On the deposits front, the current and saving deposits accretion was healthy, growing at 15.2% and 19.2% yoy, respectively. CASA ratio declined by ~100bp on a yoy basis to 47.4%. NIMs for the bank came in at 4.5%, higher by 20bp qoq and 10bp yoy, primarily on higher retail lending. The non-interest income (excluding treasury) grew at a subdued 2.3% yoy, as fee income growth came in moderate at 10.8% and income from exchange transactions declined by 38.1% yoy. The bank reported treasury gains of `65cr for the quarter compared to a loss of `72cr in 4QFY2012. On the asset quality front, the bank reported stability, as its Gross NPA ratio improved marginally by 5bp to 0.97%, while Net NPA ratio remained flat at 0.2%. The PCR (excluding write-offs) for the bank remained stable sequentially at 79.9%. Outlook and valuation: HDFC Bank is currently trading at a one-year forward P/ABV of 3.8x (3.3x FY2015E ABV), higher than its median of 3.5x (over FY200513). We believe the current valuations largely factor in the positives, leaving limited upside in the stock. Hence we maintain our Neutral rating on the stock. Key financials (standalone)
Y/E March (` cr) NII % chg Net profit % chg NIM (%) EPS (`) P/E (x) P/ABV (x) RoA (%) RoE (%)
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 22.8 8.6 51.6 17.0
Abs. (%) Sensex HDFC
3m (4.2) 5.0
1yr 12.2 26.5
3yr 8.4 77.3
Vaibhav Agrawal
022 3935 7800 Ext: 6808 vaibhav.agrawal@angelbroking.com
FY2012 12,297 16.6 5,167 31.6 4.3 22.0 31.3 5.4 1.7 18.7
FY2013 15,811 28.6 6,727 30.2 4.6 28.3 24.4 4.5 1.8 20.3
FY2014E 19,362 22.5 8,393 24.8 4.6 35.3 19.5 3.8 1.9 21.3
FY2015E 23,763 22.7 10,151 20.9 4.5 42.7 16.2 3.2 1.8 21.8
Sourabh Taparia
022 3935 7800 Ext: 6872 sourabh.taparia@angelbroking.com Akshay Narang 022 3935 7800 Ext: 6829 akshay.narang@angelbroking.com Harshal Patkar 022 3935 7800 Ext: 6847 harshal.patkar@angelbroking.com
Please refer to important disclosures at the end of this report
HDFC Bank | 4QFY2013 Result Update
Exhibit 1: 4QFY2013 performance (standalone)

Particulars (` cr) Interest earned - on Advances / Bills - on investments - on balance with RBI & others - on others Interest Expended Net Interest Income Other income Other income excl. treasury - Fee & commission income - Treasury income - Forex & derivative income Operating income Operating expenses - Employee expenses - Other Opex Pre-provision Profit Provisions & Contingencies PBT Provision for Tax PAT Effective Tax Rate (%) 4QFY13 9,324 7,087 2,096 78 64 5,029 4,295 1,804 1,739 1,383 65 201 6,099 3,136 1,005 2,131 2,963 301 2,662 772 1,890 29.0 3QFY13 8,890 6,904 1,893 68 25 4,909 3,982 1,928 1,792 1,402 136 258 5,909 2,788 1,004 1,784 3,121 405 2,716 857 1,859 31.6 % chg (qoq) 4.9 2.6 10.7 14.9 152.3 2.4 7.9 (6.4) (3.0) (1.4) (52.2) (21.9) 3.2 12.5 0.1 19.4 (5.1) (25.8) (2.0) (9.9) 1.7 (255)bp 4QFY12 7,561 5,783 1,728 45 5 4,000 3,561 1,629 1,700 1,247 (72) 325 5,190 2,664 928 1,735 2,527 412 2,115 662 1,453 31.3 % chg (yoy) 23.3 22.5 21.3 73.8 1,172.1 25.7 20.6 10.7 2.3 10.8 (38.1) 17.5 17.7 8.3 22.8 17.3 (27.0) 25.9 16.7 30.1 (228)bp FY2013* 34,746 26,504 7,820 282 141 19,254 15,493 6,606 6,445 5,137 161 1,010 22,099 10,862 3,965 6,897 11,236 1,486 9,751 3,024 6,726 31.0 FY2012* 27,286 20,537 6,505 137 108 14,990 12,297 5,244 5,440 4,276 (196) 1,139 17,540 8,590 3,400 5,190 8,950 1,437 7,513 2,346 5,167 31.2 % chg (yoy) 27.3 29.1 20.2 105.4 30.2 28.4 26.0 26.0 18.5 20.1 (11.3) 26.0 26.5 16.6 32.9 25.5 3.4 29.8 28.9 30.2 (21)bp
Source: Company, Angel Research, Note: * figures (before PBT) not comparable as FY2013 numbers as per revised accounting practices
Exhibit 2: 4QFY2013 Actual vs. estimates

Particulars (` cr) Net interest income Other income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Actual
Estimates
Var. (%)
4,295 1,804 6,099 3,136 2,963 301 2,662 772 1,890
4,099 1,903 6,002 2,848 3,154 319 2,835 943 1,892
4.8 (5.2) 1.6 10.1 (6.1) (5.8) (6.1) (18.1) (0.1)
April 23, 2013
Exhibit 3: 4QFY2013 performance analysis

Particulars Balance sheet Advances (` cr) Deposits (` cr) Credit-to-Deposit Ratio (%) Current deposits (` cr) Saving deposits (` cr) CASA deposits (` cr) CASA ratio (%) CAR (%) Tier 1 CAR (%) Profitability Ratios (%) Reported NIM Cost-to-income ratio Asset quality Gross NPAs (` cr) Gross NPAs (%) Net NPAs (` cr) Net NPAs (%) Provision Coverage Ratio (%)
4QFY13 239,721 296,247 80.9 52,310 88,211 140,521 47.4 16.8 11.1 4.5 51.4 2,335 1.0 469 0.2 79.9
3QFY13 241,493 284,119 85.0 47,048 81,942 128,990 45.4 17.0 10.9 4.3 47.2 2,432 1.0 496 0.2 79.6
% chg (qoq) (0.7) 4.3 (408)bp 11.2 7.7 8.9 203bp (20)bp 20bp 20bp 424bp (4.0) (3)bp (5.4) 0bp 30bp
4QFY12 195,420 246,706 79.2 45,408 73,998 119,406 48.4 16.5 11.6 4.4 51.3 1,999 1.0 352 0.2 82.4
% chg (yoy) 22.7 20.1 171bp 15.2 19.2 17.7 (97)bp 30bp (50)bp 10bp 10bp 16.8 (5)bp 33.1 0bp (246)bp
Loan growth remains above industry

During 4QFY2013, the bank registered an above-industry average growth in advances at 22.7% yoy, which was largely aided by robust traction in its retail loan portfolio (up 4.9% qoq and 27.3% yoy). Within the retail loan portfolio, a strong buildup was witnessed in Business banking, Personal loans and Credit cards advances, as these portfolios grew by 31.5%, 26.0% & 45.3% yoy respectively. Considering the current systemic stress in the CVCE industry, the bank moderated its CVCE loan book by 1.6% qoq. Gold loan portfolio grew by 64.5% yoy and now constitutes 3.6% of the total retail advances (2.0% of total loan book). Overall, higher retail lending resulted in share of retail advances to overall loan book increasing by around 200bp yoy and 300bp qoq to 56.9%. Within the retail loan book, the share of unsecured advances (Personal loans and Credit cards) reduced sequentially to 20.2% from 20.6%. On the liabilities front, the deposit growth was healthy at 20.2% yoy. The current and saving deposits accretion was healthy, growing at 15.2% and 19.2% yoy, respectively. CASA ratio declined by around 100bp on a yoy basis to 47.4%.
April 23, 2013
Exhibit 4: Strong growth in retail loans aides robust advance growth

Particulars (` cr) Auto Loans CVCE Two Wheelers Personal Loans Business Banking Loans Against Securities Credit Cards Home loans Others Gold Retail Advances 4QFY13 3QFY13 % chg (qoq) 4QFY12 % chg (yoy) % to total 30,942 16,106 3,008 17,500 24,516 1,210 10,114 16,783 11,243 4,965 30,041 16,371 2,943 16,809 23,081 1,063 10,011 15,896 13,743 4,703 3.0 (1.6) 2.2 4.1 6.2 13.8 1.0 5.6 (18.2) 5.5 26,398 13,050 2,537 13,891 18,639 1,046 6,960 14,259 10,346 3,018 17.2 23.4 18.6 26.0 31.5 15.7 45.3 17.7 8.7 64.5 27.3 23.5 12.3 2.3 13.3 18.7 0.9 7.7 12.8 8.6 3.6 100.0
136,388 129,958
4.9 107,126
NIMs higher sequentially by 20bp

NIMs for the bank came in at 4.5%, higher by 20bp qoq and 10bp yoy, primarily on higher retail lending. After going relatively slow on branch expansion in 9MFY2013 with addition of 232 branches, it added 286 branches in 4QFY2013, thereby taking the total branch additions in FY2013 to 518 and the total branch network to 3,062. Of the total branch additions in FY2013, around 35% were micro branches (manned by 2-3 employees). Regionally, most of the expansion came in semi-urban and rural areas. The banks increased geographic presence along with healthy network expansion should aid it in maintaining an above-system average retail loan growth on the asset side and CASA accretion on the liability side.
Exhibit 5: Business growth remains robust

(%) 30.0 22.5 15.0 7.5 Advances
Exhibit 6: Reported NIM remains above 4%

4QFY13
(%) 4.6 4.5 4.4 4.3 4.2 4.40 4.30 4.20 4.30
4QFY12
1QFY13
2QFY13
3QFY13
4.50
22.2
21.5
22.9
24.3
22.7
18.3
22.0
18.8
22.2
20.1
4.1 4.0 4QFY12 1QFY13* 2QFY13* 3QFY13 4QFY13
Deposits
Source: Company, Angel Research, Note:*as per old reporting practices.
April 23, 2013
Exhibit 7: CASA ratio lower by 100bp yoy

(%) 49.0 48.4 47.4 46.0 45.9 45.4
Exhibit 8: CASA growth remains healthy for the bank

30.0 20.0 10.0 27.2 26.2 CASA growth (%) SA growth (%) 19.2 17.7
46.0
43.0
4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13
40.0 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

Exhibit 9: Capital adequacy remains healthy

Tier-I CAR (%) 20.0 15.0 10.0 5.0 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 11.6 10.9 11.4 10.9 11.1 16.5 4.9 15.5 4.6 Tier-II CAR (%) 17.0 5.6 17.0 6.1 16.8 5.7
Exhibit 10: Branch network growth picks up in 2HFY13

3,500 3,000 2,500 2,000 8,913 Branches 10,316 9,709 ATMs (RHS) 10,490 10,743 11,500 9,500 7,500 5,500
2,544
2,564
2,620
2,776
1,500 1,000
3,062
3,500 1,500
4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

Non-interest income (excl. treasury) grew at subdued pace due to decline in forex income, as fee income growth came in moderate
During 4QFY2013, the non-interest income (excluding treasury) for the bank grew at a subdued pace of 2.3% yoy, as fee income growth came in moderate at 10.8% and income from exchange transactions declined by 38.1% yoy. Decline in forex income was due to lower customer volumes owing to lower exchange rate volatility during the quarter. The bank reported treasury gains of `65cr for the quarter compared to a loss of `72cr in 4QFY2012. Overall, other income for the bank grew at a moderate pace of 10.7% yoy, during the quarter.
Exhibit 11: Non-interest income (excl. treasury) grew at subdued pace

Particulars (` cr) Fees & Commission Treasury Income Forex Income & Others Other 4QFY13 1,383 65 201 155 3QFY13 1,402 136 258 132 % chg (qoq) (1.4) (52.2) (21.9) 17.2 4QFY12 1,247 (72) 325 128 % chg (yoy) 10.8 (190.8) (38.1) 21.0
Other income
Other income excl. treasury
1,804
1,739
1,928
1,792
(6.4)
(3.0)
1,629
1,700
10.7
2.3
April 23, 2013
4QFY13
Asset quality remains stable

On the asset quality front, the bank reported stability, as its Gross NPA ratio improved marginally by 5bp to 0.97%, while the Net NPA ratio remained flat at 0.2%. During FY2013, the annual slippage rate for the bank remained stable at 1.0%. However, considering higher systemic stress in the CVCE industry, the bank too witnessed higher delinquencies in its CVCE portfolio. During the quarter, the bank had to make higher specific provisions, which impaired its ability to make floating provisions, as it had made in the past. During 4QFY2013, the bank made floating provision of `50cr, thereby taking its outstanding floating provisions to around `1,835cr. The PCR (excluding write-offs) for the bank remained stable sequentially at 79.9%.
Exhibit 12: Asset quality trends

Gross NPAs (%) 1.5 1.2 0.9 0.6 0.3 82.4 81.0 81.9 Net NPAs (%) PCR (Calc, %, RHS) 90.0
79.6
79.9 80.0
70.0
1.0
0.2
1.0
0.2
0.9
0.2
1.0
0.2
1.0
0.0
0.2
60.0
4QFY12
1QFY13
2QFY13
3QFY13
4QFY13
Accounting practices revised during the quarter

During the quarter, the bank revised its accounting practices following a directive from the RBI. It re-classified commission paid to sales agents as operating expenses and commission received from dealer/manufacturer under other income, as against its earlier practice of adjusting the net commission (commission received minus the commission paid to sales agent) from interest income. Further, it re-classified direct charge offs and recoveries from written off accounts, hitherto included under provisioning expenses, to operating expenses and other income, respectively. These changes in accounting practices resulted in an increase in NII and other income, and a corresponding increase in operating expenses and provisioning expenses for the bank. We have recalibrated our Income statement estimates to factor in the revision in the accounting practices.
April 23, 2013
Investment arguments
Strong capital adequacy, expanding network, to sustain traction in credit market share and CASA deposits, respectively
As of 4QFY2013 the banks capital adequacy stood strong at 16.8%, with tier-1 ratio at a comfortable 11.1%. During the quarter, the bank raised USD500mn through 5yr tier-I bonds. On the back of such strong CAR, we feel the bank is well positioned to continue its growth path and increase its credit market share over FY2014-15. The banks strong and profitable growth over FY200512 was supported by significant traction in the CASA market share (from 3.3% in FY2005 to ~6.0% in FY2012). The dominant transaction banking business lies at the core of the banks strength in CASA deposits. Moreover, aided by the merger of the Centurion Bank of Punjab, the banks branch network moved up at a 30% CAGR during FY200612. In line with the network expansion witnessed in the previous two years, the bank added more than 500 branches and 1,830 ATMs this year, taking the total count of branches to 3,062 and ATMs to 10,743. During the past one year, the bank increased its presence in ~450 new towns/cities and also opened 193 micro branches manned by 2-3 employees to further increase its rural penetration. The banks increased geographic presence along with healthy network expansion should aid it in maintaining above system-average retail loan growth on the asset side and CASA accretion on the liability side.
Comprehensive product portfolio, sustain traction in fee income
effective
cross-selling
to
Apart from the traditional CEB (commission, exchange & brokerage) and forex income, the bank earns substantial fee income from transaction banking, cards and third-party distribution, among others. Overall, the banks core fee income posted a 27.8% CAGR over FY200812 and stands at 1.8% of average total assets (ATA) for FY2013, one of the best in the sector offering another significant competitive advantage to the bank. The banks major proportion of fee income (~80-90%) comes from the retail asset side. Strong growth in retail loan book over the past year (27.3% yoy) coupled with potential fee income revenue from new branch additions (though with a lag) should help the bank maintain its fee income to average assets at 1.8% over FY2014-15 as well.
Stable asset quality

The bank has been able to improve its asset quality consistently, as reflected in the decline in slippages, ie from 5.2% in FY2009 to 1.0% in FY2013. Provisions to average assets also declined from 1.2% in FY2009 to 0.5% in FY2013. The bank has been actively making floating rate provisions (cumulative of around `1,835cr, as against `1,435cr a year ago) and going forward, even if specific credit costs increase to normalized levels, the overall provisioning burden is expected to be manageable due to the buffer created by these floating provisions.
April 23, 2013
Valuations leave limited upside

We believe HDFC Bank is among the most competitive banks in the sector, with an A-list Management at the helm of affairs, which has one of the best track records in the sector. We believe the bank is well positioned for high qualitative growth, with strong CAR, healthy 20%+ branch expansion, and robust asset quality. On the back of this, in our view, the bank is set to further gain credit and CASA market share. However, HDFC Bank is currently trading at a one-year forward P/ABV of 3.8x (3.3x FY2015E ABV), higher than its median of 3.5x (over FY2005-13). We believe the current valuations largely factor in the positives, leaving limited upside in the stock. Hence we maintain our Neutral rating on the stock.
Exhibit 13: Key assumptions

Particulars (%) Credit growth Deposit growth CASA ratio NIMs Other income growth Growth in staff expenses Growth in other expenses Slippages Coverage ratio
Source: Angel Research
Earlier estimates FY2014 25.0 25.0 45.4 4.4 21.0 22.5 22.5 1.2 76.9 FY2015 25.0 25.0 44.7 4.4 23.7 25.0 25.0 1.2 76.9
Revised estimates FY2014 25.0 25.0 45.7 4.6 21.4 17.5 20.0 1.2 79.6 FY2015 25.0 25.0 45.1 4.5 22.0 20.0 22.5 1.3 79.6
Exhibit 14: Change in estimates

FY2014 Particulars (` cr) NII Non-interest income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Source: Angel Research
FY2015 Earlier estimates 22,873 9,847 32,720 15,864 16,856 1,752 15,104 5,134 9,970 Revised Var. (%) estimates 23,763 10,153 33,916 16,279 17,637 2,259 15,378 5,227 10,151 3.9 3.1 3.7 2.6 4.6 28.9 1.8 1.8 1.8
Earlier estimates 18,601 7,958 26,559 12,691 13,868 1,255 12,613 4,287 8,326
Revised Var. (%) estimates 19,362 8,320 27,682 13,384 14,298 1,677 12,621 4,228 8,393 4.1 4.5 4.2 5.5 3.1 33.6 0.1 (1.4) 0.8
April 23, 2013
Exhibit 15: Angel EPS forecast vs. consensus

Year (`) FY2014E FY2015E Angel forecast 35.3 42.7 Bloomberg consensus 35.8 44.7 Var. (%) (1.4) (4.5)
Source: Bloomberg, Angel Research
Exhibit 16: P/ABV band

Price (`) 1,200 1,000 800 600 400 200 0 2.00x 2.75x 3.50x 4.25x 5.00x
Oct-08
Feb-07
Nov-10
Sep-06
Sep-11
Feb-12
May-08
May-13
Dec-07
Aug-09
Dec-12
Oct-13
Jan-10
Jun-10
Jul-07
Apr-06
Apr-11
Jul-12
Exhibit 17: P/E band

1,200 1,050 900 750 600 450 300 150 0 Price (`) 15x 20x 25x 30x
Aug-05
Dec-07
Mar-09
Apr-10
Mar-06
Aug-12
Jul-08
May-07
Nov-10
April 23, 2013
Mar-13
Oct-06
Feb-09
Sep-09
Jan-05
Jun-11
Jan-12
Mar-14
Exhibit 18: HDFC Bank Premium/Discount to the Sensex (%)

(%) 70 60 50 40 30 20 10 0 (10) (20) (30) Premium/Discount to Sensex Avg. Historical Premium
Oct-06
Feb-09
Sep-09
May-07
Nov-10
Dec-07
Jun-11
Apr-10
Jan-12
Mar-06
Aug-12
Jul-08
Source: Bloomberg, Angel Research
Exhibit 19: Recommendation summary

Company AxisBk FedBk HDFCBk ICICIBk* SIB YesBk AllBk AndhBk BOB BOI BOM CanBk CentBk CorpBk DenaBk IDBI# IndBk IOB J&KBk OBC PNB SBI* SynBk UcoBk UnionBk UtdBk VijBk Reco. Buy Neutral Neutral Accumulate Neutral Neutral Accumulate Neutral Buy Accumulate Accumulate Accumulate Neutral Buy Accumulate Accumulate Buy Buy Neutral Neutral Accumulate Accumulate Accumulate Neutral Accumulate Accumulate Neutral CMP (`) 1,444 451 689 1,162 24 495 137 93 692 335 50 437 70 378 95 87 166 67 1,279 280 778 2,287 119 66 237 60 52 Tgt. price (`) 1,696 1,306 155 815 360 56 461 453 101 96 200 78 889 2,567 130 264 68 Upside (%) 17.4 12.4 12.8 17.7 7.4 11.4 5.5 19.8 6.6 10.2 21.1 15.7 14.2 12.2 9.1 11.3 12.2 FY2015E P/ABV (x) 1.6 1.0 3.3 1.7 0.9 2.1 0.5 0.6 0.7 0.7 0.6 0.7 0.6 0.5 0.5 0.5 0.6 0.4 1.0 0.6 0.7 1.3 0.6 0.7 0.7 0.4 0.6 FY2015E Tgt. P/ABV (x) 1.9 1.9 0.6 0.9 0.8 0.6 0.8 0.6 0.6 0.5 0.7 0.5 0.8 1.4 0.7 0.8 0.5 FY2015E P/E (x) 9.7 7.6 16.9 12.0 5.3 10.3 3.8 4.0 4.8 4.9 3.8 5.1 3.9 3.6 3.6 3.7 3.9 3.3 6.4 4.4 4.4 8.2 4.1 4.6 5.0 2.9 4.8 FY2013-15E EPS CAGR (%) 16.6 10.0 20.3 15.5 11.4 14.9 12.6 4.2 17.0 21.8 14.8 14.0 42.8 8.3 4.3 24.5 6.5 53.3 (5.2) 17.5 12.4 16.4 (3.5) 36.9 21.2 40.4 21.2 FY2015E RoA (%) 1.6 1.2 1.8 1.4 1.0 1.3 0.8 0.8 1.0 0.8 0.6 0.8 0.6 0.8 0.8 0.9 1.0 0.7 1.2 0.8 1.0 1.0 0.7 0.6 0.8 0.7 0.5 FY2015E RoE (%) 17.3 13.7 21.0 16.5 17.1 22.1 14.2 13.4 16.0 15.1 15.6 14.1 13.3 14.4 15.3 13.5 14.9 13.1 16.0 13.1 16.3 17.0 15.2 12.6 15.3 14.7 11.7
Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF
April 23, 2013
Mar-13
10
Company Background
HDFC Bank is the second-largest private sector bank in India with a pan-India network of 3,062 branches and nearly 10,743 ATMs. The bank is promoted and 23% owned by HDFC, India's largest housing finance company. HDFC Bank has been at the forefront of modern retail banking in India. The bank has pioneered the transaction banking model in India, which has enabled it to garner substantial CASA deposits as well as fee income, while the focus on retail lending (which forms more than 50% of total loans) has further helped the bank in maintaining above-industry margins.
April 23, 2013
11
Income statement
Y/E March (` cr) Net Interest Income - YoY Growth (%) Other Income - YoY Growth (%) Operating Income - YoY Growth (%) Operating Expenses - YoY Growth (%) Pre - Provision Profit - YoY Growth (%) Prov. & Cont. - YoY Growth (%) Profit Before Tax - YoY Growth (%) Prov. for Taxation - as a % of PBT PAT - YoY Growth (%) FY09 7,421 42.0 3,471 57.4 10,892 46.5 5,685 51.8 5,207 41.2 1,908 35.6 3,299 44.6 1,054 32.0 2,245 41.2 FY10 8,386 13.0 3,983 14.8 12,370 13.6 5,940 4.5 6,430 23.5 2,141 12.2 4,289 30.0 1,340 31.3 2,949 31.3 FY11 10,543 25.7 4,335 8.8 14,878 20.3 7,153 20.4 7,725 20.2 1,907 (10.9) 5,819 35.7 1,892 32.5 3,926 33.2 FY12 12,297 16.6 5,244 21.0 17,540 17.9 8,590 20.1 8,950 15.9 1,437 (24.6) 7,513 29.1 2,346 31.2 5,167 31.6 FY13 15,811 28.6 6,853 30.7 22,664 29.2 11,236 30.8 11,428 27.7 1,677 16.7 9,751 29.8 3,024 31.0 6,727 30.2 FY14E 19,362 22.5 8,320 21.4 27,682 22.1 13,384 19.1 14,298 25.1 1,677 (0.0) 12,621 29.4 4,228 33.5 8,393 24.8 FY15E 23,763 22.7 10,153 22.0 33,916 22.5 16,279 21.6 17,637 23.4 2,259 34.7 15,378 21.8 5,227 34.0 10,151 20.9
Note: FY2013 onwards figures (before PBT) reflect revised accounting practices
Balance sheet
Y/E March (` cr) Share Capital Reserves & Surplus Deposits - Growth (%) Borrowings Tier 2 Capital Other Liab. & Prov. Total Liabilities Cash Balances Bank Balances Investments Advances - Growth (%) Fixed Assets Other Assets Total Assets - Growth (%) FY09 425 14,627 41.7 2,686 6,478 16,243 FY10 458 21,065 17.2 7,012 5,904 20,616 FY11 465 24,914 24.6 7,447 6,947 28,993 FY12 469 29,455 18.3 13,250 10,597 37,432 FY13 476 35,738 20.1 20,820 12,186 34,864 FY14E 476 42,223 25.0 25,678 11,882 43,177 FY15E 476 50,079 25.0 31,759 11,585 53,883
142,812 167,404 208,586 246,706 296,247 370,309 462,886
183,271 222,459 277,353 337,910 400,332 493,745 610,667 13,527 3,979 58,818 55.9 1,707 6,357 15,483 14,459 58,608 27.3 2,123 5,955 25,101 4,568 70,929 27.1 2,171 14,601 14,991 5,947 14,627 12,653 16,664 15,605 20,830 19,301
97,483 111,614 135,140 163,089 22.2 2,347 21,722 22.7 2,703 19,014 25.0 3,234 23,451 25.0 3,880 29,005
98,883 125,831 159,983 195,420 239,721 299,651 374,564
183,271 222,459 277,353 337,910 400,332 493,745 610,667 37.6 21.4 24.7 21.8 18.5 23.3 23.7
April 23, 2013
12
Ratio analysis
Y/E March Profitability ratios (%) NIMs Cost to Income Ratio RoA RoE B/S ratios (%) CASA Ratio Credit/Deposit Ratio CAR - Tier I Asset Quality (%) Gross NPAs Net NPAs Slippages Loan Loss Prov. /Avg. Assets Provision Coverage Per Share Data (`) EPS ABVPS (75% cover.) DPS Valuation Ratios PER (x) P/ABVPS (x) Dividend Yield DuPont Analysis NII (-) Prov. Exp. Adj. NII Treasury Int. Sens. Inc. Other Inc. Op. Inc. Opex PBT Taxes RoA Leverage RoE 4.7 1.2 3.5 0.3 3.7 1.9 5.7 3.6 2.1 0.7 1.4 11.9 16.9 4.1 1.1 3.1 0.2 3.3 1.8 5.0 2.9 2.1 0.7 1.5 11.1 16.1 4.2 0.8 3.5 (0.0) 3.4 1.8 5.2 2.9 2.3 0.8 1.6 10.7 16.7 4.0 0.5 3.5 (0.1) 3.5 1.8 5.2 2.8 2.4 0.8 1.7 11.1 18.7 4.3 0.5 3.8 0.0 3.9 1.8 5.7 3.0 2.6 0.8 1.8 11.2 20.3 4.3 0.4 4.0 0.0 4.0 1.8 5.8 3.0 2.8 0.9 1.9 11.3 21.3 4.3 0.4 3.9 0.0 3.9 1.8 5.7 2.9 2.8 0.9 1.8 11.8 21.8 65.3 9.8 0.2 53.5 7.3 0.3 40.8 6.3 0.5 31.3 5.4 0.6 24.4 4.5 0.8 19.5 3.8 1.0 16.2 3.2 1.2 10.6 70.2 1.7 12.9 94.0 2.4 16.9 109.1 3.3 22.0 127.5 4.3 28.3 152.2 5.5 35.3 179.5 6.9 42.7 212.5 8.3 2.0 0.6 5.3 1.0 68.4 1.4 0.3 2.6 1.0 78.4 1.0 0.2 1.1 0.3 82.5 1.0 0.2 1.0 0.2 82.4 1.0 0.2 1.2 0.3 79.9 0.8 0.2 1.2 0.3 79.6 0.6 0.1 1.3 0.3 79.3 44.4 69.2 15.1 10.2 52.0 75.2 17.4 13.3 52.7 76.7 16.2 12.2 48.4 79.2 16.5 11.6 47.4 80.9 16.7 11.9 45.7 80.9 15.4 11.5 45.1 80.9 14.2 11.0 4.9 52.2 1.4 16.9 4.3 48.0 1.5 16.1 4.4 48.1 1.6 16.7 4.3 49.0 1.7 18.7 4.6 49.6 1.8 20.3 4.6 48.3 1.9 21.3 4.5 48.0 1.8 21.8 FY09 FY10 FY11 FY12 FY13 FY14E FY15E
Note: FY2013 onwards ratios reflect revised accounting practices
April 23, 2013
13
Research Team Tel: 022 - 39357800
E-mail: research@angelbroking.com
Website: www.angelbroking.com
DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
HDFC Bank No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
Buy (> 15%) Reduce (-5% to -15%)
Accumulate (5% to 15%) Sell (< -15%)
Neutral (-5 to 5%)
April 23, 2013
14

HDFC Bank 4Q FY 2013

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HDFC Bank 4Q FY 2013

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4QFY2013 Result Update | Banking

April 23, 2013

Source: Company, Angel Research

Abs. (%) Sensex HDFC

1yr 12.2 26.5

3yr 8.4 77.3

Please refer to important disclosures at the end of this report