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HDFC Bank--------------------------------------------------------------------- Maintain OUTPERFORM
Strong set of results as expected
● HDFC Bank’s core operating profits continued to grow at 50%+
YoY. Reported net profit (+34% YoY) was in line with estimates.
Net profit growth adjusted for excess provisions was up 57% YoY.
● Loan growth during the quarter was stronger than expected at
10% QoQ (20% YoY), driven by corporate loans; management
expects FY12 loan growth to outpace system growth by 3-7%.
● Despite a rise in savings deposit rates, NIMs were stable QoQ at
4.2%, helped by a 640 bp QoQ jump in the loan-deposit ratio
(83% in 1Q12). While LDR is expected to moderate in the coming
quarters, the bank is confident of sustaining 4.2% NIMs, as costs
can be gradually passed on. Asset quality continued to be robust
with gross NPLs of 1.0% (1.2% in 1Q11), and credit costs
continued to be a low 0.4%.
● In the current environment of rising rates and slowing loan growth,
as we expect the current benign asset quality cycle in the banking
system to end, and with its stable 25-30% EPS growth, HDFC
Bank remains our preferred pick in the sector. There was a stock
split on 16 July 2011(10:2) which resulted in the EPS and TP
changes (80%).
Operational performance continues to be robust
Loan growth during the quarter was a strong 10% QoQ, mainly driven
by the corporate segment (+15% QoQ). Management is targeting to
grow 3-7% ahead of the system growth in FY12 (22-25% levels). YoY
loan growth was in line with system at 20% YoY (high base in 1Q11,
16% QoQ growth), and the growth was driven mainly by retail (29%
YoY) vs corporate (13% YoY). Management expects the share of
corporate loans to increase going forward. Margins were flat QoQ to
4.2% despite higher savings deposit rates, helped by a 640 bp QoQ
rise in the loan-deposit ratio (currently at 83%). The bank expects the
margins to be sustainable at 4.2% levels as the higher savings deposit
rate can be gradually passed on. Savings deposits growth continued
to be healthy (20% YoY) and share of CASA was stable YoY at 49%
(CASA share dropped on a QoQ basis due to the seasonal current a/c
deposits). Management targets to add 700-800 branches to its current
2,111 branch network over the next three years, which should help
sustain robust savings deposits accretion (CAGR of 27% over the
past three years). Cost-income was stable at 48%. Fee income
(excluding forex) growth (+16% YoY) slightly lagged the asset growth
due to a slowdown in the distribution income.
Asset quality continued to be robust with gross NPLs stable QoQ at
1.0% (coverage of 136%, including floating provisions). The bank has
made Rs2.5 bn of floating provisions during the quarter. The o/s
floating provisions are at ~Rs10.8 bn and contingent provisions are
~Rs3.5 bn—total additional provisions of Rs14.3 bn (5.6% of FY11
book). Credit costs continued to be low at 0.4% (0.7% in FY11). Our
FY12 credit cost estimates are at 0.7% and total provision estimate
including excess provisions is at 1.1%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HDFC Bank--------------------------------------------------------------------- Maintain OUTPERFORM
Strong set of results as expected
● HDFC Bank’s core operating profits continued to grow at 50%+
YoY. Reported net profit (+34% YoY) was in line with estimates.
Net profit growth adjusted for excess provisions was up 57% YoY.
● Loan growth during the quarter was stronger than expected at
10% QoQ (20% YoY), driven by corporate loans; management
expects FY12 loan growth to outpace system growth by 3-7%.
● Despite a rise in savings deposit rates, NIMs were stable QoQ at
4.2%, helped by a 640 bp QoQ jump in the loan-deposit ratio
(83% in 1Q12). While LDR is expected to moderate in the coming
quarters, the bank is confident of sustaining 4.2% NIMs, as costs
can be gradually passed on. Asset quality continued to be robust
with gross NPLs of 1.0% (1.2% in 1Q11), and credit costs
continued to be a low 0.4%.
● In the current environment of rising rates and slowing loan growth,
as we expect the current benign asset quality cycle in the banking
system to end, and with its stable 25-30% EPS growth, HDFC
Bank remains our preferred pick in the sector. There was a stock
split on 16 July 2011(10:2) which resulted in the EPS and TP
changes (80%).
Operational performance continues to be robust
Loan growth during the quarter was a strong 10% QoQ, mainly driven
by the corporate segment (+15% QoQ). Management is targeting to
grow 3-7% ahead of the system growth in FY12 (22-25% levels). YoY
loan growth was in line with system at 20% YoY (high base in 1Q11,
16% QoQ growth), and the growth was driven mainly by retail (29%
YoY) vs corporate (13% YoY). Management expects the share of
corporate loans to increase going forward. Margins were flat QoQ to
4.2% despite higher savings deposit rates, helped by a 640 bp QoQ
rise in the loan-deposit ratio (currently at 83%). The bank expects the
margins to be sustainable at 4.2% levels as the higher savings deposit
rate can be gradually passed on. Savings deposits growth continued
to be healthy (20% YoY) and share of CASA was stable YoY at 49%
(CASA share dropped on a QoQ basis due to the seasonal current a/c
deposits). Management targets to add 700-800 branches to its current
2,111 branch network over the next three years, which should help
sustain robust savings deposits accretion (CAGR of 27% over the
past three years). Cost-income was stable at 48%. Fee income
(excluding forex) growth (+16% YoY) slightly lagged the asset growth
due to a slowdown in the distribution income.
Asset quality continued to be robust with gross NPLs stable QoQ at
1.0% (coverage of 136%, including floating provisions). The bank has
made Rs2.5 bn of floating provisions during the quarter. The o/s
floating provisions are at ~Rs10.8 bn and contingent provisions are
~Rs3.5 bn—total additional provisions of Rs14.3 bn (5.6% of FY11
book). Credit costs continued to be low at 0.4% (0.7% in FY11). Our
FY12 credit cost estimates are at 0.7% and total provision estimate
including excess provisions is at 1.1%.
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