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UBS Investment Research
HDFC Bank
L ow provisions offset slowing fee
In-line results
Net profit of Rs12bn (+31% y/y) was driven by lower provisions while Net interest
income grew at +17% y/y. Key highlights: 1) loans growth of 20% y/y, 7% q/q
(26% after adjusting Telecom lending in Q1FY11), 2) Despite sequential
improvement CASA ratio slipped 180bps q/q to 47.1% - CASA growth at 10%
YoY has been slowest in last 5 years, 3) Provisioning stayed low at 80bps of O/s
loans, 4) Fee income growth of 26% was supported by strong exchange income.
Maintain estimates; Lowering provisions and fee income estimates
The bank continued to make excess-provisions in Q2FY12, which we believe
would cushion future earnings when NPL picks up. Considering strong retail asset
quality, we are lowering our LLP forecast to 80bps of loans (from 100 bps) and
also lower non-interest income growth forecast to 24% (from 28%) in FY12. We
maintain loans forecast at 23% CAGR for FY12-13 with stable margins.
Resultantly, we tweak earning estimates by +1% for FY12/14.
Valuation premium to stay: Maintain Buy
HDFCB is best positioned among Indian banks given the asset quality headwinds
in the sector, in our view. We believe the stock would sustain its premium
valuations compared to peers given its strong deposit franchise and lower asset
quality risks.
Valuations: Raise PT to Rs575 from Rs560
We value the stock using residual income model. At our price target, the stock
trades at 21x FY13E earnings and 3.9x FY13E book.
HDFC Bank
HDFC Bank was established by HDFC, a housing finance company, in 1995.
The bank has established a network of 1,506 branches and 2,890 ATMs, both
through organic and inorganic routes. Most of its new branches are in nonmetro/
under-banked regions, a regulatory requirement and strategy to attract
more current and savings accounts from smaller towns. About 62% of HDFC
Bank's branches are outside the nine biggest cities.
Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit, increase NPL risk,
impact fee income, and exert pressure on NIM.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
HDFC Bank
L ow provisions offset slowing fee
In-line results
Net profit of Rs12bn (+31% y/y) was driven by lower provisions while Net interest
income grew at +17% y/y. Key highlights: 1) loans growth of 20% y/y, 7% q/q
(26% after adjusting Telecom lending in Q1FY11), 2) Despite sequential
improvement CASA ratio slipped 180bps q/q to 47.1% - CASA growth at 10%
YoY has been slowest in last 5 years, 3) Provisioning stayed low at 80bps of O/s
loans, 4) Fee income growth of 26% was supported by strong exchange income.
Maintain estimates; Lowering provisions and fee income estimates
The bank continued to make excess-provisions in Q2FY12, which we believe
would cushion future earnings when NPL picks up. Considering strong retail asset
quality, we are lowering our LLP forecast to 80bps of loans (from 100 bps) and
also lower non-interest income growth forecast to 24% (from 28%) in FY12. We
maintain loans forecast at 23% CAGR for FY12-13 with stable margins.
Resultantly, we tweak earning estimates by +1% for FY12/14.
Valuation premium to stay: Maintain Buy
HDFCB is best positioned among Indian banks given the asset quality headwinds
in the sector, in our view. We believe the stock would sustain its premium
valuations compared to peers given its strong deposit franchise and lower asset
quality risks.
Valuations: Raise PT to Rs575 from Rs560
We value the stock using residual income model. At our price target, the stock
trades at 21x FY13E earnings and 3.9x FY13E book.
HDFC Bank
HDFC Bank was established by HDFC, a housing finance company, in 1995.
The bank has established a network of 1,506 branches and 2,890 ATMs, both
through organic and inorganic routes. Most of its new branches are in nonmetro/
under-banked regions, a regulatory requirement and strategy to attract
more current and savings accounts from smaller towns. About 62% of HDFC
Bank's branches are outside the nine biggest cities.
Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit, increase NPL risk,
impact fee income, and exert pressure on NIM.
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