HDFC Bank reported strong 4Q13 results, with 30% y/y PAT growth
driven by strong margins and continued asset quality strength. NIMs
ticked up, primarily led by strong deposit flows, and credit quality
remained stable, with 55bp credit costs. Loan growth was robust at 22.7%,
with most retail segments continuing to fire well. We raise our Mar-14 PT
by 11%, to Rs750, on the strong operating outlook and maintain OW.
HDFC Bank is one of our top picks among Indian financials.
NIM improvement. NIMs improved from 4.3% to 4.5% q/q (as per new
RBI-directed accounting policies), led by an improving deposit profile.
The CASA ratio improved 200bp q/q, to 47.4%, driven by 11% q/q CA
growth and 8% q/q SA growth – term deposits were almost flat q/q, and
that is a strong long-term benefit, as TD pricing tends to be the tightest
in 4Q. There was some yield enhancement in the loan book, too, but
deposits remained the primary driver.
Asset quality stable. Asset quality improved, with credit costs declining
18bp q/q, to 50bp. Management mentioned that there was some stability
in the CV portfolio, though delinquencies still remained elevated – the
CE portfolio continues to see stress. The rest of the book remains robust,
and overall credit costs remain well below expected loss levels in the
retail book. There was no guidance for credit costs, but management
reiterated that past discretionary provisioning remains a cushion against
a worsening economy.
Loan growth strong, fees weak. Loan growth, at 22.7%, was slightly
ahead of estimates, with management reiterating that the industry outlook
is improving for FY14. Management expects retail to continue to
dominate growth, though corporate demand could be better in FY14.
Fees were under pressure (declined 1% q/q) from shifting products in
insurance sales, some pressure from loan fees as the retail mix changed
away from installment products, and regulatory pressure on some
banking products, like debit cards.
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driven by strong margins and continued asset quality strength. NIMs
ticked up, primarily led by strong deposit flows, and credit quality
remained stable, with 55bp credit costs. Loan growth was robust at 22.7%,
with most retail segments continuing to fire well. We raise our Mar-14 PT
by 11%, to Rs750, on the strong operating outlook and maintain OW.
HDFC Bank is one of our top picks among Indian financials.
NIM improvement. NIMs improved from 4.3% to 4.5% q/q (as per new
RBI-directed accounting policies), led by an improving deposit profile.
The CASA ratio improved 200bp q/q, to 47.4%, driven by 11% q/q CA
growth and 8% q/q SA growth – term deposits were almost flat q/q, and
that is a strong long-term benefit, as TD pricing tends to be the tightest
in 4Q. There was some yield enhancement in the loan book, too, but
deposits remained the primary driver.
Asset quality stable. Asset quality improved, with credit costs declining
18bp q/q, to 50bp. Management mentioned that there was some stability
in the CV portfolio, though delinquencies still remained elevated – the
CE portfolio continues to see stress. The rest of the book remains robust,
and overall credit costs remain well below expected loss levels in the
retail book. There was no guidance for credit costs, but management
reiterated that past discretionary provisioning remains a cushion against
a worsening economy.
Loan growth strong, fees weak. Loan growth, at 22.7%, was slightly
ahead of estimates, with management reiterating that the industry outlook
is improving for FY14. Management expects retail to continue to
dominate growth, though corporate demand could be better in FY14.
Fees were under pressure (declined 1% q/q) from shifting products in
insurance sales, some pressure from loan fees as the retail mix changed
away from installment products, and regulatory pressure on some
banking products, like debit cards.
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