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HDFC Bank
Key highlights of 3QFY11 and what can be expected for the rest of FY11
Loan book grew by 1.3% q-q and 33.1% y-y in 3QFY11, backed by a deposit
growth of 24.2% y-y – CASA deposits grew 28% y-y and term deposits grew 20.5%
y-y. CASA ratio was flat at 50.5% compared to 50.6% in 2QFY11.
The core NIM was stable at 4.2% an expanding LDR (which increased from 80% in
2QFY11 to 83% in 3QFY11). Net-interest income grew by an impressive 9.9% q-q
and 24.9% y-y. Non-interest income increased 17.4% q-q and 32.2% y-y.
GNPLs declined 3.29% sequentially and 9.7% y-y – GNPL ratio closed at 1.11%.
NNPL ratio closed at 0.2% on the back of a core-provision cover of 81.4%. Loanloss
provisions for 3QFY11 at INR4.66b were at 111bp of average loans.
What the bank needs to achieve in 4QFY11 to meet our expectations
Loans of INR14b will have to be disbursed in 4QFY11 to meet our loan growth
expectation of 27.6% for FY11. We expect NIMs to decline to 4.04% for 4QFY11. We
need to bear in mind the higher incidence of priority sector loans in 4Q (which should
drag loan yields down) and a further pass-through of higher funding costs. We are
factoring in LLPs of 100bp for 4QFY11.
What to expect in FY12
We are budgeting for a loan growth of 22%, core NIM of 4.4%, core fee income growth
of 18% – leading to a PAT growth of 19%. Our loan-loss provisions stay in the range of
105bp for FY12. We are factoring in a cost-income ratio of 46.5% for FY12.
Valuation: We have cut our TP to INR2,150 (from INR2,400), implying a FY12E P/BV
of 3.5x (from 3.9x earlier). The stock trades at 3.3x our FY12E adjusted BV for adjusted
ROE of 17%. Our TP is based on a three-stage residual income model, which assumes
a risk-free rate of 8.3%, equity risk premium of 6%, terminal growth rate of 4% and beta
of 1.0. Key risks to TP are: higher-than-expected NIM compression and LLPs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� �
HDFC Bank
Key highlights of 3QFY11 and what can be expected for the rest of FY11
Loan book grew by 1.3% q-q and 33.1% y-y in 3QFY11, backed by a deposit
growth of 24.2% y-y – CASA deposits grew 28% y-y and term deposits grew 20.5%
y-y. CASA ratio was flat at 50.5% compared to 50.6% in 2QFY11.
The core NIM was stable at 4.2% an expanding LDR (which increased from 80% in
2QFY11 to 83% in 3QFY11). Net-interest income grew by an impressive 9.9% q-q
and 24.9% y-y. Non-interest income increased 17.4% q-q and 32.2% y-y.
GNPLs declined 3.29% sequentially and 9.7% y-y – GNPL ratio closed at 1.11%.
NNPL ratio closed at 0.2% on the back of a core-provision cover of 81.4%. Loanloss
provisions for 3QFY11 at INR4.66b were at 111bp of average loans.
What the bank needs to achieve in 4QFY11 to meet our expectations
Loans of INR14b will have to be disbursed in 4QFY11 to meet our loan growth
expectation of 27.6% for FY11. We expect NIMs to decline to 4.04% for 4QFY11. We
need to bear in mind the higher incidence of priority sector loans in 4Q (which should
drag loan yields down) and a further pass-through of higher funding costs. We are
factoring in LLPs of 100bp for 4QFY11.
What to expect in FY12
We are budgeting for a loan growth of 22%, core NIM of 4.4%, core fee income growth
of 18% – leading to a PAT growth of 19%. Our loan-loss provisions stay in the range of
105bp for FY12. We are factoring in a cost-income ratio of 46.5% for FY12.
Valuation: We have cut our TP to INR2,150 (from INR2,400), implying a FY12E P/BV
of 3.5x (from 3.9x earlier). The stock trades at 3.3x our FY12E adjusted BV for adjusted
ROE of 17%. Our TP is based on a three-stage residual income model, which assumes
a risk-free rate of 8.3%, equity risk premium of 6%, terminal growth rate of 4% and beta
of 1.0. Key risks to TP are: higher-than-expected NIM compression and LLPs.
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