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HDFC Bank Overweight
HDBK.BO, HDFCB IN
Strong 3Q11, Maintain Overweight
• Strong quarter: HDFC Bank reported net profit of Rs10.9bn up 33%
y/y , 3% higher than our and consensus estimates. Overall growth was
strong across most parameters with stable margins and CASA, strong fee
income growth and low credit costs. Though headline credit growth
moderated it was primarily due to maturity of telecom loans.
• Retail credit growth strong: Headline credit growth was tepid at 1%
q/q growth primarily due to maturity of the telecom and other short term
loans leading to ~8% contraction in the non–retail book. Retail loan
growth has been strong at ~10% q/q growth with robust growth in the
CV and home loan book.
• Margins and CASA stable: Reported margins were stable at 4.2% q/q.
CASA has remained stable at >50% with >30% growth in savings
deposits. We expect CASA ratios to moderate from current levels due to
CASA migration and generic tightness in current deposits and this
coupled with higher term deposit rates would lead to some downward
bias to margins in the near term.
• Credit costs come off further: Asset quality continues to improve with
lower Gross and Net NPAs q/q. Credit costs also have come off to
~70bps from >100bps in 2Q11 and that has also largely aided in
improving NPA coverage. Also HDFCB has conservatively provided
Rs1.1bn on their MFI exposure (~10% of MFI exposure).We factor in
~130-140bps of credit costs in FY12/13E and given current asset quality
trends this could surprise on the downside.
• Maintain Overweight: We maintain our positive stance on HDFC bank
based on our view that it offers high credit growth with earnings
resilience. Margins could hold up relatively better given high CASA and
low dependence on wholesale deposits
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
HDFC Bank Overweight
HDBK.BO, HDFCB IN
Strong 3Q11, Maintain Overweight
• Strong quarter: HDFC Bank reported net profit of Rs10.9bn up 33%
y/y , 3% higher than our and consensus estimates. Overall growth was
strong across most parameters with stable margins and CASA, strong fee
income growth and low credit costs. Though headline credit growth
moderated it was primarily due to maturity of telecom loans.
• Retail credit growth strong: Headline credit growth was tepid at 1%
q/q growth primarily due to maturity of the telecom and other short term
loans leading to ~8% contraction in the non–retail book. Retail loan
growth has been strong at ~10% q/q growth with robust growth in the
CV and home loan book.
• Margins and CASA stable: Reported margins were stable at 4.2% q/q.
CASA has remained stable at >50% with >30% growth in savings
deposits. We expect CASA ratios to moderate from current levels due to
CASA migration and generic tightness in current deposits and this
coupled with higher term deposit rates would lead to some downward
bias to margins in the near term.
• Credit costs come off further: Asset quality continues to improve with
lower Gross and Net NPAs q/q. Credit costs also have come off to
~70bps from >100bps in 2Q11 and that has also largely aided in
improving NPA coverage. Also HDFCB has conservatively provided
Rs1.1bn on their MFI exposure (~10% of MFI exposure).We factor in
~130-140bps of credit costs in FY12/13E and given current asset quality
trends this could surprise on the downside.
• Maintain Overweight: We maintain our positive stance on HDFC bank
based on our view that it offers high credit growth with earnings
resilience. Margins could hold up relatively better given high CASA and
low dependence on wholesale deposits
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