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HDFC Bank
Asset quality is expected to deteriorate from here, but not alarmingly. The most
vulnerable segments are business banking and SME, which inevitably struggle
when the economy slows. Also, credit losses in the retail segment are expected to
normalize upwards at some stage in the cycle. Management is not unduly worried
about this, mainly because of the countercyclical buffer it has created in the last
three quarters, which should cushion the higher provisions.
The savings bank deregulation is not expected to create any major long-term
issue for margins. Management made it clear that they will not be the first to raise
rates, but would be forced to follow if any large bank hiked rates. The larger
banks are not expected to move by more than 100bp.
Even if that were to happen, the hike would be passed on in terms of rate hikes
and higher fees. Management pointed out that the effective cost of savings bank
deposits have risen by ~125bp in the past 6 quarters, without a meaningful impact
on NIMs or ROAs.
HDFCB is confident of maintaining a growth rate of 400-600bp above system
loan growth. A big driver of that would be its expanded branch network, and the
management is very happy with the traction from its non-metro branches.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HDFC Bank
Asset quality is expected to deteriorate from here, but not alarmingly. The most
vulnerable segments are business banking and SME, which inevitably struggle
when the economy slows. Also, credit losses in the retail segment are expected to
normalize upwards at some stage in the cycle. Management is not unduly worried
about this, mainly because of the countercyclical buffer it has created in the last
three quarters, which should cushion the higher provisions.
The savings bank deregulation is not expected to create any major long-term
issue for margins. Management made it clear that they will not be the first to raise
rates, but would be forced to follow if any large bank hiked rates. The larger
banks are not expected to move by more than 100bp.
Even if that were to happen, the hike would be passed on in terms of rate hikes
and higher fees. Management pointed out that the effective cost of savings bank
deposits have risen by ~125bp in the past 6 quarters, without a meaningful impact
on NIMs or ROAs.
HDFCB is confident of maintaining a growth rate of 400-600bp above system
loan growth. A big driver of that would be its expanded branch network, and the
management is very happy with the traction from its non-metro branches.
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