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HDFC Bank--------------------------------------------------------------------- Maintain OUTPERFORM
Core profitability continues to improve
● HDFC Bank’s core operating profits continued to grow at 50%+
YoY. Reported net profit (+33% YoY) was in line with estimates.
● Robust loan growth (33% YoY), stable margins (4.2%) and
declining credit costs (0.5%) were the key drivers for the strong
operating profit growth. While the corporate loans were down 8%
QoQ (due to run-off of short-term loans), retail loan growth
momentum continued to be strong (36% YoY; 10% QoQ).
● Savings deposit remained robust at 30%+ YoY and share of
CASA was stable at 50%. We view HDFC Bank as best placed
among peers and expect it to maintain NIMs at over 4%. With Tier
I at about 13%, it is also well capitalised to sustain strong loan
growth trajectory. We expect ~30% earnings CAGR over FY10-
13.
● The stock is currently trading at 19x FY12 earnings – 20%
discount to the historical valuations (while Sensex is trading at a
historic avg). HDFC Bank remains our preferred pick in the sector
and we retain our OUTPERFORM rating.
Operational performance continues to be robust
Loan growth was muted during the quarter at 1% QoQ due to shortterm
corporate loan run-offs during the last fortnight of Decemer 10
(corporate loans were down 8% QoQ). YoY loan growth continues to
be robust at 33%. Retail loan growth continued to accelerate at a
robust pace (36% YoY; 10% QoQ) and growth was broadbased
across segments. NII growth was strong at 10% QoQ (+25% YoY)
and margins were flat QoQ to 4.2% (in line with estimates).
Management has made Rs1.0 bn of floating provisions and Rs1.7 bn
of contingent provisions (Rs1.1 bn for the MFI loans; total MFI
exposure at Rs10 bn), adjusted for which net profits were up 57%
YoY. Currently, the bank has o/s floating provisions of ~Rs5 bn and
contingent provisions of Rs3 bn – total additional provisions of Rs8 bn
(4% of FY11 book value; 14% of FY11 PBT). Savings deposits growth
remained robust (31% YoY) and share of CASA stable at 50%. Costincome
was stable at 47% (despite ~Rs1.0 bn of one-off expenses).
Asset quality continued to improve with gross NPLs declining 6 bp
QoQ to 1.1% (coverage improved to 82% – excl. floating provisions).
With slowing NPL accretion, credit costs were down to 0.5% (our
FY12 credit cost estimates of 1.1% have a downside risk).
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
HDFC Bank--------------------------------------------------------------------- Maintain OUTPERFORM
Core profitability continues to improve
● HDFC Bank’s core operating profits continued to grow at 50%+
YoY. Reported net profit (+33% YoY) was in line with estimates.
● Robust loan growth (33% YoY), stable margins (4.2%) and
declining credit costs (0.5%) were the key drivers for the strong
operating profit growth. While the corporate loans were down 8%
QoQ (due to run-off of short-term loans), retail loan growth
momentum continued to be strong (36% YoY; 10% QoQ).
● Savings deposit remained robust at 30%+ YoY and share of
CASA was stable at 50%. We view HDFC Bank as best placed
among peers and expect it to maintain NIMs at over 4%. With Tier
I at about 13%, it is also well capitalised to sustain strong loan
growth trajectory. We expect ~30% earnings CAGR over FY10-
13.
● The stock is currently trading at 19x FY12 earnings – 20%
discount to the historical valuations (while Sensex is trading at a
historic avg). HDFC Bank remains our preferred pick in the sector
and we retain our OUTPERFORM rating.
Operational performance continues to be robust
Loan growth was muted during the quarter at 1% QoQ due to shortterm
corporate loan run-offs during the last fortnight of Decemer 10
(corporate loans were down 8% QoQ). YoY loan growth continues to
be robust at 33%. Retail loan growth continued to accelerate at a
robust pace (36% YoY; 10% QoQ) and growth was broadbased
across segments. NII growth was strong at 10% QoQ (+25% YoY)
and margins were flat QoQ to 4.2% (in line with estimates).
Management has made Rs1.0 bn of floating provisions and Rs1.7 bn
of contingent provisions (Rs1.1 bn for the MFI loans; total MFI
exposure at Rs10 bn), adjusted for which net profits were up 57%
YoY. Currently, the bank has o/s floating provisions of ~Rs5 bn and
contingent provisions of Rs3 bn – total additional provisions of Rs8 bn
(4% of FY11 book value; 14% of FY11 PBT). Savings deposits growth
remained robust (31% YoY) and share of CASA stable at 50%. Costincome
was stable at 47% (despite ~Rs1.0 bn of one-off expenses).
Asset quality continued to improve with gross NPLs declining 6 bp
QoQ to 1.1% (coverage improved to 82% – excl. floating provisions).
With slowing NPL accretion, credit costs were down to 0.5% (our
FY12 credit cost estimates of 1.1% have a downside risk).
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