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We hosted the HDFC Bank management (Aditya Puri, MD&CEO and
Paresh Sukthankar, ED) on a two-day road show in Singapore.
Management does not see much stress yet, and is sanguine on riding out a
tougher FY13.
Asset quality – no visible stress yet. The generally vulnerable segments
like SME and retail are holding up. Management does admit that,
theoretically, NPLs should normalize upward from current levels (e.g.,
retail credit costs are below expected loss levels). There are, however,
no visible signs of that happening yet, despite the slight slowdown in the
economy.
Loan growth targets muted. Management maintains its growth
aspirations at 300-500bp above system (JPMe 18% for FY12E). The
bank remains conservative in its loan growth target despite an improved
competitive position, mainly due to the heightened environmental risk.
The loan mix is unlikely to change, and HDFCB intends to keep term
lending (especially infra-related) at a minimum.
Margin outlook stable. Management sees the different moving parts of
NIM drivers cancelling each other out and expects NIMs to remain
broadly stable. Deposit cost pressures continue (HDFCB's largely retail
base cushions the impact) but are being compensated for by pricing
power in lending. Management does not see the need to move up the risk
ladder to preserve NIMs.
Remains top pick. HDFCB remains our top pick in the financials space.
We do not see any risk to our estimates, despite the weakening macro
picture – we think HDFCB’s ability to manage a tough environment is
proven. We see the 3.4x PBV (one-year forward) supported by resilient
fundamentals and improving return ratios.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We hosted the HDFC Bank management (Aditya Puri, MD&CEO and
Paresh Sukthankar, ED) on a two-day road show in Singapore.
Management does not see much stress yet, and is sanguine on riding out a
tougher FY13.
Asset quality – no visible stress yet. The generally vulnerable segments
like SME and retail are holding up. Management does admit that,
theoretically, NPLs should normalize upward from current levels (e.g.,
retail credit costs are below expected loss levels). There are, however,
no visible signs of that happening yet, despite the slight slowdown in the
economy.
Loan growth targets muted. Management maintains its growth
aspirations at 300-500bp above system (JPMe 18% for FY12E). The
bank remains conservative in its loan growth target despite an improved
competitive position, mainly due to the heightened environmental risk.
The loan mix is unlikely to change, and HDFCB intends to keep term
lending (especially infra-related) at a minimum.
Margin outlook stable. Management sees the different moving parts of
NIM drivers cancelling each other out and expects NIMs to remain
broadly stable. Deposit cost pressures continue (HDFCB's largely retail
base cushions the impact) but are being compensated for by pricing
power in lending. Management does not see the need to move up the risk
ladder to preserve NIMs.
Remains top pick. HDFCB remains our top pick in the financials space.
We do not see any risk to our estimates, despite the weakening macro
picture – we think HDFCB’s ability to manage a tough environment is
proven. We see the 3.4x PBV (one-year forward) supported by resilient
fundamentals and improving return ratios.
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