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HDFC Bank (HDBK.BO; Rs2,360.80; 2L)
HDFC Bank management presented at our India conference today. Key
takeaways are as below:
Loan growth to remain stable at 25% in FY12 - HDBK management sounded
confident on achieving 25% loan growth in current year, though slightly more retail
biased than last couple of years. Growth is likely to remain widespread across
segments - more likely from business banking and personal loans, while CVs and
auto are expected to slow. Corporate book should continue to be working capitaldriven
with low project finance exposure.
Net interest margins to remain stable - HDBKs' NIMs have been stable between
the 4.1-4.3% range across interest rate cycles and management does not expect
this time to be any different. While the hike in the savings bank rate has impact cost
of funds by around 10-15bps, this has been passed on and will not lead to an NIM
impact. NIM protection largely coming from its well matched asset-liability duration
(around 1.3-1.4yrs for both).
Asset quality currently in a sweet spot - Management does not see this changing
over the next couple of quarters, and expects delinquencies to remain low and will
continue to provide for counter cyclical provisioning buffer. Overall credit costs are
likely to remain stable at 1.2-1.3% levels.
Fee growth muted, cost ratios likely stable - Management expects lower feeincome
levels in third-party product distribution to moderate overall fee growth
levels – it could be slightly lower than asset growth near term, though is likely to
pick up from FY12 onwards. Operating costs do have inflationary pressure, but
cost/income ratios likely to remain stable at around 47-48%.
Thrust on rural for longer-term growth and priority sector requirements -
HDBK management is increasingly focusing on rural/agriculture segments as
longer-term growth drivers; risk/return ratios on this book are in line with the overall
bank and it does not see this as a profitability/risk drag. Going ahead this will also
increasingly help in meeting priority sector requirements.
Comfortable on capital - HDBK's current Tier 1 ratio is at 12.2% and management
suggests this should be sufficient for the next three years at current growth levels.
Also, it does not expect Basel 3 implementation to impact capital significantly.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HDFC Bank (HDBK.BO; Rs2,360.80; 2L)
HDFC Bank management presented at our India conference today. Key
takeaways are as below:
Loan growth to remain stable at 25% in FY12 - HDBK management sounded
confident on achieving 25% loan growth in current year, though slightly more retail
biased than last couple of years. Growth is likely to remain widespread across
segments - more likely from business banking and personal loans, while CVs and
auto are expected to slow. Corporate book should continue to be working capitaldriven
with low project finance exposure.
Net interest margins to remain stable - HDBKs' NIMs have been stable between
the 4.1-4.3% range across interest rate cycles and management does not expect
this time to be any different. While the hike in the savings bank rate has impact cost
of funds by around 10-15bps, this has been passed on and will not lead to an NIM
impact. NIM protection largely coming from its well matched asset-liability duration
(around 1.3-1.4yrs for both).
Asset quality currently in a sweet spot - Management does not see this changing
over the next couple of quarters, and expects delinquencies to remain low and will
continue to provide for counter cyclical provisioning buffer. Overall credit costs are
likely to remain stable at 1.2-1.3% levels.
Fee growth muted, cost ratios likely stable - Management expects lower feeincome
levels in third-party product distribution to moderate overall fee growth
levels – it could be slightly lower than asset growth near term, though is likely to
pick up from FY12 onwards. Operating costs do have inflationary pressure, but
cost/income ratios likely to remain stable at around 47-48%.
Thrust on rural for longer-term growth and priority sector requirements -
HDBK management is increasingly focusing on rural/agriculture segments as
longer-term growth drivers; risk/return ratios on this book are in line with the overall
bank and it does not see this as a profitability/risk drag. Going ahead this will also
increasingly help in meeting priority sector requirements.
Comfortable on capital - HDBK's current Tier 1 ratio is at 12.2% and management
suggests this should be sufficient for the next three years at current growth levels.
Also, it does not expect Basel 3 implementation to impact capital significantly.
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