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Business growth stalls…
HDFC Bank’s Q3FY11 PAT of | 1088 crore was in line with our estimates
despite positive surprise growth in non interest income (18% QoQ to |
1128 crore), which offset higher than anticipated provisioning of | 466
crore. The balance sheet grew a healthy 22% YoY to | 249820 crore, on
account of 33%YoY shore up in advances to | 160619 crore and 24% in
deposits to | 192202 crore. The loan growth of 1% QoQ was the lowest
in the past seven quarters. The C/D ratio was stretched at 84%
attributable to 2%QoQ de-growth in deposits. We expect the C/D ratio
to remain high at 80-81% even for FY12E.
Growth in retail loans, stable CASA helps maintain NIM
The proportion of retail advances of total increased from 52% in Q2FY11
to 55% in Q3FY11. Retail advances grew 7% QoQ. This was also helped
by | 1500 crore of loan portfolio bought from HDFC. On the other hand,
the CASA ratio remained constant at 50.5%. This helped the bank to
report NIM of 4.2%. We expect NIM to be at 4-4.1% for FY12E.
Non interest income growth surprises us
Non interest income of | 1128 crore was principally contributed by CEB of
| 943 crore (up 23% YoY and 10% QoQ) and lower than expected loss on
revaluation of investments of | 31 crore. We expect 15% CAGR in non
interest income over YF10-12E to | 4996 crore.
Asset quality - as clean as it can get
GNPA @1.1%, NNPA @ 0.2% as against 1.6% GNPA and 0.5% NNPA in
Q3FY10 looks very healthy. The NPA provision coverage ratio (excluding
write-offs) stands at 78% Total cumulative restructured assets were at
0.3% of the bank’s gross advances, which is the lowest in the industry.
On a conservative basis (due to a rise in the retail portfolio) we expect
NNPA @ 0.5% for FY12E.
Valuation
We are concerned by the higher C/D ratio of the bank and RBI’s recent
directive to cool down such aggressive growth. We expect NIM to slide
further by another10-15 bps on the back of aggressive deposit growth to
support balance sheet growth. In the current backdrop, we have valued
the bank at 3.9x FY12E ABV and have assigned a fair value of | 2304.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Business growth stalls…
HDFC Bank’s Q3FY11 PAT of | 1088 crore was in line with our estimates
despite positive surprise growth in non interest income (18% QoQ to |
1128 crore), which offset higher than anticipated provisioning of | 466
crore. The balance sheet grew a healthy 22% YoY to | 249820 crore, on
account of 33%YoY shore up in advances to | 160619 crore and 24% in
deposits to | 192202 crore. The loan growth of 1% QoQ was the lowest
in the past seven quarters. The C/D ratio was stretched at 84%
attributable to 2%QoQ de-growth in deposits. We expect the C/D ratio
to remain high at 80-81% even for FY12E.
Growth in retail loans, stable CASA helps maintain NIM
The proportion of retail advances of total increased from 52% in Q2FY11
to 55% in Q3FY11. Retail advances grew 7% QoQ. This was also helped
by | 1500 crore of loan portfolio bought from HDFC. On the other hand,
the CASA ratio remained constant at 50.5%. This helped the bank to
report NIM of 4.2%. We expect NIM to be at 4-4.1% for FY12E.
Non interest income growth surprises us
Non interest income of | 1128 crore was principally contributed by CEB of
| 943 crore (up 23% YoY and 10% QoQ) and lower than expected loss on
revaluation of investments of | 31 crore. We expect 15% CAGR in non
interest income over YF10-12E to | 4996 crore.
Asset quality - as clean as it can get
GNPA @1.1%, NNPA @ 0.2% as against 1.6% GNPA and 0.5% NNPA in
Q3FY10 looks very healthy. The NPA provision coverage ratio (excluding
write-offs) stands at 78% Total cumulative restructured assets were at
0.3% of the bank’s gross advances, which is the lowest in the industry.
On a conservative basis (due to a rise in the retail portfolio) we expect
NNPA @ 0.5% for FY12E.
Valuation
We are concerned by the higher C/D ratio of the bank and RBI’s recent
directive to cool down such aggressive growth. We expect NIM to slide
further by another10-15 bps on the back of aggressive deposit growth to
support balance sheet growth. In the current backdrop, we have valued
the bank at 3.9x FY12E ABV and have assigned a fair value of | 2304.
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