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HDFC (HDFC IN – Rs626 – BUY)
Strong opportunity and improving competitive environment
1. Management highlighted that home ownership in India is underpenetrated
which coupled with favourable demographics and affordability
levels offer long-term growth opportunities for financiers.
Underpenetration and
affordability will drive
long term growth
2. Over past few months, while the metros have seen some moderation in
demand due to high interest rates and property prices, demand from the
smaller towns is holding-up well and will be key growth driver.
3. Competitive intensity in the sector has also eased with peers focusing on
profitability rather than market share gains.
Healthy loan growth and stable spreads
4. Management expects 18-20% growth in loans during FY12 led by growth
in the smaller towns.
Expect 18-20% growth in
loans during FY12 and
stable spreads
5. HDFC has a widespread branch reach with nearly 300 own outlets and
over 2,000 branches of HDFC Bank which also markets HDFC’s mortgage
loans.
6. HDFC plans to expand its mortgage loan marketing alliance with other
banks.
7. Tight liquidity conditions and risk averseness among banks is enabling
HDFC to make corporate lending at profitable returns.
8. Spreads are likely to be stable between 2.2-2.3%. In spite of rise in cost
of wholesale funds, HDFC is able to maintain spreads due to balanced ALM
and hike in lending rates; easing competitive environment is positive.
Stable asset quality and high provisions
9. Asset quality trends continue to improve and gross NPL ratio was at 83bps
and coverage ratio at 114%.
Asset quality trends
continue to improve
10. Due to conservative provisioning norms, HDFC has some surplus
provisions of ~Rs3.3bn.
11. Therefore, impact of additional provisioning as per the new regulatory
norms is likely to be nominal.
Insurance subsidiaries Managing profitability of subsidiaries
expected to report profit
in FY12
12. Although, regulatory challenges have caused NBAP margins of life
insurance subsidiary to dip, HDFC Standard Life plans to contain margin
decline through changes in product-mix, improvement in conservation
ratio and cut in costs.
13. Both the life and general insurance subsidiaries are expected to report
accounting profit in FY12.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HDFC (HDFC IN – Rs626 – BUY)
Strong opportunity and improving competitive environment
1. Management highlighted that home ownership in India is underpenetrated
which coupled with favourable demographics and affordability
levels offer long-term growth opportunities for financiers.
Underpenetration and
affordability will drive
long term growth
2. Over past few months, while the metros have seen some moderation in
demand due to high interest rates and property prices, demand from the
smaller towns is holding-up well and will be key growth driver.
3. Competitive intensity in the sector has also eased with peers focusing on
profitability rather than market share gains.
Healthy loan growth and stable spreads
4. Management expects 18-20% growth in loans during FY12 led by growth
in the smaller towns.
Expect 18-20% growth in
loans during FY12 and
stable spreads
5. HDFC has a widespread branch reach with nearly 300 own outlets and
over 2,000 branches of HDFC Bank which also markets HDFC’s mortgage
loans.
6. HDFC plans to expand its mortgage loan marketing alliance with other
banks.
7. Tight liquidity conditions and risk averseness among banks is enabling
HDFC to make corporate lending at profitable returns.
8. Spreads are likely to be stable between 2.2-2.3%. In spite of rise in cost
of wholesale funds, HDFC is able to maintain spreads due to balanced ALM
and hike in lending rates; easing competitive environment is positive.
Stable asset quality and high provisions
9. Asset quality trends continue to improve and gross NPL ratio was at 83bps
and coverage ratio at 114%.
Asset quality trends
continue to improve
10. Due to conservative provisioning norms, HDFC has some surplus
provisions of ~Rs3.3bn.
11. Therefore, impact of additional provisioning as per the new regulatory
norms is likely to be nominal.
Insurance subsidiaries Managing profitability of subsidiaries
expected to report profit
in FY12
12. Although, regulatory challenges have caused NBAP margins of life
insurance subsidiary to dip, HDFC Standard Life plans to contain margin
decline through changes in product-mix, improvement in conservation
ratio and cut in costs.
13. Both the life and general insurance subsidiaries are expected to report
accounting profit in FY12.
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