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HDFC Bank
(HDBK.BO / HDFCB IN)
Strong and profitable retail franchise
■ Main investment thesis: HDFC Bank is India’s 2nd largest private sector
bank with a customer base of around 20mn. It has demonstrated a
consistent track record of 30%+ earnings and loan growth over the past
decade led by diversifying revenue streams, well-contained risk, high
profitability and an efficient management team. One of the key strengths of
HDFC Bank’s business model has been the robust liability franchise with
high proportion of low cost savings and current account balances (over 50%
- highest among the peers). This provides a funding cost advantage, a stable
funding base and a large customer base to cross-sell products. Aided by
declining credit costs, improving deposit franchise and a strong Tier-I of
12.7% (as on Sept-10), we believe the bank is now well positioned to deliver
25%+ asset and earnings growth.
■ India exposure and plans: HDFC bank has a strong network of over 1750
branches which it has expanded by 2.5x over the last 2.5 years. More than
68% of these are outside the top 9 cities. It is also well positioned both in
urban and rural markets. The strong growth in network and the improved
productivity of the CBoP branches (merged with HDFC Bank in Apr’08) has
been driving the franchise build-up of the bank further. HDFC bank is the
market leader in retail financing and is the amongst the top 3 players in auto,
CVs, credit cards and personal loans (market share of 23% in auto loans,
21% in CVs and 22% in credit card loans). HDFC Bank’s share of retail
loans is highest among its peers at 52% (retail book size of USD 18 bn).
■ Impact of survey findings: While consumer balance sheets are still
significantly under-leveraged, our survey indicates a marked increased in
appetite for credit, especially in big-ticket items such as property and cars. In
addition, we see a sharp growth in use of financing with rising income levels
– close to 100% respondents in the lowest income group purchased a car
with cash, while more than 70% in the highest income groups used a
combination of cash and credit. Given its leadership in retail finance, HDFC
bank is best placed to capture industry growth led by higher consumer
appetite as well as rising incomes.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HDFC Bank
(HDBK.BO / HDFCB IN)
Strong and profitable retail franchise
■ Main investment thesis: HDFC Bank is India’s 2nd largest private sector
bank with a customer base of around 20mn. It has demonstrated a
consistent track record of 30%+ earnings and loan growth over the past
decade led by diversifying revenue streams, well-contained risk, high
profitability and an efficient management team. One of the key strengths of
HDFC Bank’s business model has been the robust liability franchise with
high proportion of low cost savings and current account balances (over 50%
- highest among the peers). This provides a funding cost advantage, a stable
funding base and a large customer base to cross-sell products. Aided by
declining credit costs, improving deposit franchise and a strong Tier-I of
12.7% (as on Sept-10), we believe the bank is now well positioned to deliver
25%+ asset and earnings growth.
■ India exposure and plans: HDFC bank has a strong network of over 1750
branches which it has expanded by 2.5x over the last 2.5 years. More than
68% of these are outside the top 9 cities. It is also well positioned both in
urban and rural markets. The strong growth in network and the improved
productivity of the CBoP branches (merged with HDFC Bank in Apr’08) has
been driving the franchise build-up of the bank further. HDFC bank is the
market leader in retail financing and is the amongst the top 3 players in auto,
CVs, credit cards and personal loans (market share of 23% in auto loans,
21% in CVs and 22% in credit card loans). HDFC Bank’s share of retail
loans is highest among its peers at 52% (retail book size of USD 18 bn).
■ Impact of survey findings: While consumer balance sheets are still
significantly under-leveraged, our survey indicates a marked increased in
appetite for credit, especially in big-ticket items such as property and cars. In
addition, we see a sharp growth in use of financing with rising income levels
– close to 100% respondents in the lowest income group purchased a car
with cash, while more than 70% in the highest income groups used a
combination of cash and credit. Given its leadership in retail finance, HDFC
bank is best placed to capture industry growth led by higher consumer
appetite as well as rising incomes.
In the light of the economic downturn here are some benefits and profit of start a franchise. Yeah, the HDFC is really profitable franchise.
ReplyDeleteadvantages of franchising