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In FY11, HDFC Bank reported 10bp yoy improvement in ROAs to 1.6% after a 25-30bp
contingency/floating provision charge made during the year. We leave our earnings forecast
largely unchanged and expect ROAs to remain elevated going forward. HDFC Bank remains our
top pick among private banks. Buy
4QFY11: In-line performance; deposit mix remains best in class
Net interest income (NII) rose 21% yoy (up 2% qoq) in 4QFY11 on the back of 27% yoy loan
growth (up 0.5% qoq) and largely stable qoq net interest margins (NIMs) at 4.2%. Core fee
income increased 23% yoy. The provision for bad loans charge was stable qoq at 20bp in
4QFY11 (including floating provisions). The low-cost deposits ratio improved 100bp yoy to 51%
yoy as of March 2010 and continues to be among the highest in the industry.
Loan mix remains well diversified; asset quality remains good
Both the retail and corporate loan book grew about 27% yoy, keeping the mix largely stable yoy
at 50% each (note, there is a change in classification of retail and corporate loans in FY11).
Within the retail segment, commercial vehicle loans grew 33%, business banking 36% and home
loans 32% (see Chart 1). GNPLs remain low at 1.05%, and restructured loans are at negligible
levels (0.3% of loan book). Gross slippages were about 1.0% of average loans in FY11 vs 2.3%
in FY10.
FY11: Improvement in NIMs partly offsets lower other income
In FY11, NIMs improved by about 10bp, largely offset by the lower contribution of other income.
Operating profit to assets remained largely stable yoy. However, the provision for bad loans fell
on the back of improvement in asset quality, leading to improvement in ROAs. ROE improved
50bp yoy to 16.8% in FY11. We believe RoAs will remain elevated and ROEs will rise due to
increase in leverage.
Valuations remain rich but consistent performance over time justifies the premium
We leave our FY12-13F earnings largely unchanged, roll out our FY14 estimates and arrive at an
EVA™-based TP of Rs 2,574. At our TP and based on our forecasts, the stock will trade at 4.1x
FY12F book value and about 25.0x FY12F earnings. HDFC Bank remains our top pick among
private sector banks due to the relatively superior ROAs and comfortable tier-I capital adequacy
(12.2% as of March 2011)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
In FY11, HDFC Bank reported 10bp yoy improvement in ROAs to 1.6% after a 25-30bp
contingency/floating provision charge made during the year. We leave our earnings forecast
largely unchanged and expect ROAs to remain elevated going forward. HDFC Bank remains our
top pick among private banks. Buy
4QFY11: In-line performance; deposit mix remains best in class
Net interest income (NII) rose 21% yoy (up 2% qoq) in 4QFY11 on the back of 27% yoy loan
growth (up 0.5% qoq) and largely stable qoq net interest margins (NIMs) at 4.2%. Core fee
income increased 23% yoy. The provision for bad loans charge was stable qoq at 20bp in
4QFY11 (including floating provisions). The low-cost deposits ratio improved 100bp yoy to 51%
yoy as of March 2010 and continues to be among the highest in the industry.
Loan mix remains well diversified; asset quality remains good
Both the retail and corporate loan book grew about 27% yoy, keeping the mix largely stable yoy
at 50% each (note, there is a change in classification of retail and corporate loans in FY11).
Within the retail segment, commercial vehicle loans grew 33%, business banking 36% and home
loans 32% (see Chart 1). GNPLs remain low at 1.05%, and restructured loans are at negligible
levels (0.3% of loan book). Gross slippages were about 1.0% of average loans in FY11 vs 2.3%
in FY10.
FY11: Improvement in NIMs partly offsets lower other income
In FY11, NIMs improved by about 10bp, largely offset by the lower contribution of other income.
Operating profit to assets remained largely stable yoy. However, the provision for bad loans fell
on the back of improvement in asset quality, leading to improvement in ROAs. ROE improved
50bp yoy to 16.8% in FY11. We believe RoAs will remain elevated and ROEs will rise due to
increase in leverage.
Valuations remain rich but consistent performance over time justifies the premium
We leave our FY12-13F earnings largely unchanged, roll out our FY14 estimates and arrive at an
EVA™-based TP of Rs 2,574. At our TP and based on our forecasts, the stock will trade at 4.1x
FY12F book value and about 25.0x FY12F earnings. HDFC Bank remains our top pick among
private sector banks due to the relatively superior ROAs and comfortable tier-I capital adequacy
(12.2% as of March 2011)
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