hdfc bank, 1q fy 2014

7/28/2019 HDFC Bank, 1Q FY 2014

1/13

Please refer to important disclosures at the end of this report 1

1QFY2014 Result Update | Banking

July 17, 2013

Particulars (` cr) 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy)NII 4,419 4,295 2.9 3,652 21.0Pre-prov. profit 3,306 2,963 11.6 2,675 23.6

PAT 1,844 1,890 (2.4) 1,417 30.1Source: Company, Angel Research

HDFC Bank delivered yet another quarter of consistent performance on thebottom-line front, with a growth of 30.1% yoy. On the operating front, NII growthcame in healthy at 21.0% yoy, while non-interest income grew by 16.7%, leadingto a healthy growth of 19.7% yoy in operating income and 23.6% yoy in pre-provisioning profit. On the asset quality front, absolute Gross and Net NPA levels,

increased sequentially by around 16% and 47% qoq, respectively. On back of 9.4%yoy lower provisioning, the bank was able to record a 30.1% yoy earnings growth.

Balance sheet growth robust; Asset quality stable: The bank registered a robustgrowth in its balance sheet, with advances growing by 21.2% yoy, largely aidedby robust traction in its retail loan portfolio (up 25.5% yoy and 3.0% qoq).Overall, the share of retail advances to overall loan book increased by around200bp yoy to 54.3%. Within the retail loan portfolio, a strong buildup waswitnessed in Personal loans; while Business Banking, Auto loans and CVCEregistered a healthy growth of 22.1% 17.4% and 16.7% yoy, respectively. On theliabilities front, the deposit growth was healthy at 17.8% yoy. While, the currentdeposits accretion was moderate at 10.5% yoy, savings deposits grew by ahealthy 16.7% yoy. CASA ratio declined by around 127bp yoy to 44.7%.NIM forthe bank remained flat sequentially at 4.6%.The non-interest income (excludingtreasury) for the bank grew at a moderate pace of 9.1% yoy, as fee incomegrowth came in moderate at 11.7% yoy and income from others increased by8.2% yoy. The bank reported treasury gains of `200cr for the quarter comparedto `67cr in 1QFY2013. On the asset quality front, the Gross NPA ratio for thebank remained flat at 1.0% sequentially, while the Net NPA ratio increased by10bp sequentially to 0.3%. PCR (excluding write-offs) for the bank declinedsequentially by 525bp to 74.7%.

Outlook and valuation: Given the challenging macro-economic developments,we believe within the banking sector, defensive stocks like HDFC Bank are likelyto outperform rest of the banking sector, going forward. Also, with minimal NPAissues over the past couple of years, unlike other banks, the bank has hadsubstantial management bandwidth to continue laying the building blocks for

organic growth and market share gains. This should place it better than peersfrom a relative growth stand-point as well. At CMP, it is trading at a one-yearforward P/ABV of 3.6x (3.1x FY2015E ABV). We recommend an Accumulaterating on the stock, with a target price of `752.Key financials (standalone)Y/E March (` cr) FY2012 FY2013 FY2014E FY2015ENII 12,885 15,811 19,365 23,767% chg 22.2 22.7 22.5 22.7

Net profit 5,167 6,726 8,640 10,730% chg 31.6 30.2 28.5 24.2

NIM (%) 4.5 4.6 4.6 4.6

EPS (`) 22.0 28.3 36.3 45.1P/E (x) 30.1 23.4 18.2 14.7

P/ABV (x) 5.2 4.4 3.7 3.1

RoA (%) 1.7 1.8 1.9 1.9

RoE (%) 18.7 20.3 21.8 22.8

Source: Company, Angel Research

ACCUMULATECMP `663

Target Price `752

Investment Period 12 Months

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 22.7

MF / Banks / Indian Fls 8.6

FII / NRIs / OCBs 51.9

Indian Public / Others 16.8

Abs. (%) 3m 1yr 3yr

Sensex 6.5 16.6 11.1

HDFC 0.3 13.7 62.5

Reuters Code HDBK.BO

HDFCB@IN

BSE Sensex 19,949

Nifty 5,973

Face Value (`) 2

52 Week High / Low 727/563

Beta 1.0

Banking

Market Cap (`cr) 158,289

Avg. Daily Volume 176,187

Vaibhav Agrawal022 3935 7800 Ext: 6808

[email protected]

Sourabh Taparia022 3935 7800 Ext: 6872

[email protected]

Harshal Patkar022 3935 7800 Ext: [email protected]

HDFC BankPerformance Highlights

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HDFC Bank | 1QFY2014 Result Update

July 17, 2013 2

Exhibit 1:4QFY2013 performance (standalone)Particulars (` cr) 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy) FY2013* FY2012* % chg (yoy)Interest earned 9,663 9,324 3.6 8,176 18.2 34,746 27,286 27.3- on Advances / Bills 7,325 7,087 3.4 6,232 17.5 26,504 20,537 29.1- on investments 2,218 2,096 5.8 1,879 18.1 7,820 6,505 20.2

- on balance with RBI & others 110 78 41.7 51 115.8 282 137 105.4

- on others 10 64 (84.1) 14 (28.3) 141 108 30.2

Interest Expended 5,244 5,029 4.3 4,523 15.9 19,254 14,990 28.4Net Interest Income 4,419 4,295 2.9 3,652 21.0 15,493 12,297 26.0Other income 1,926 1,804 6.8 1,649 16.7 6,606 5,244 26.0Other income excl. treasury 1,726 1,739 (0.7) 1,583 9.0 6,445 5,440 18.5

- Fee & commission income 1,285 1,383 (7.1) 1,150 11.7 5,137 4,276 20.1

- Treasury income 200 65 207.4 67 200.0 161 (196) -

- Forex & derivative income 314 201 56.1 315 (0.2) 1,010 1,139 (11.3)

Operating income 6,344 6,099 4.0 5,302 19.7 22,099 17,540 26.0Operating expenses 3,038 3,136 (3.1) 2,627 15.7 10,862 8,590 26.5- Employee expenses 1,109 1,005 10.3 993 11.7 3,965 3,400 16.6

- Other Opex 1,929 2,131 (9.5) 1,633 18.1 6,897 5,190 32.9

Pre-provision Profit 3,306 2,963 11.6 2,675 23.6 11,236 8,950 25.5Provisions & Contingencies 527 301 75.4 582 (9.4) 1,486 1,437 3.4

PBT 2,779 2,662 4.4 2,094 32.7 9,751 7,513 29.8Provision for Tax 935 772 21.1 676 38.3 3,024 2,346 28.9

PAT 1,844 1,890 (2.4) 1,417 30.1 6,726 5,167 30.2Effective Tax Rate (%) 33.6 29.0 464bp 32.3 135bp 31.0 31.2 (21)bp

Source: Company, Angel Research, Note: * figures (before PBT) not comparable as FY2013 numbers as per revised accounting practices

Exhibit 2:1QFY2014 Actual vs. estimatesParticulars (` cr) Actual Estimates Var. (%)Net interest income 4,419 4,360 1.3

Other income 1,926 1,885 2.2

Operating income 6,344 6,245 1.6Operating expenses 3,038 3,097 (1.9)

Pre-prov. profit 3,306 3,148 5.0Provisions & cont. 527 455 15.8

PBT 2,779 2,693 3.2

Prov. for taxes 935 848 10.2

PAT 1,844 1,845 (0.0)Source: Company, Angel Research

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July 17, 2013 3

Exhibit 3:1QFY2014 performance analysisParticulars 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy)Balance sheetAdvances (`cr) 258,589 239,721 7.9 213,338 21.2Deposits (`cr) 303,315 296,247 2.4 257,531 17.8

Credit-to-Deposit Ratio (%) 85.3 80.9 434bp 82.8 241bp

Current deposits (`cr) 46,071 52,310 (11.9) 41,682 10.5

Saving deposits (`cr) 89,480 88,211 1.4 76,674 16.7

CASA deposits (` cr) 135,551 140,521 (3.5) 118,356 14.5

CASA ratio (%) 44.7 47.4 (274)bp 46.0 (127)bp

CAR (%) 16.0 16.8 (80)bp 15.5 50bp

Tier 1 CAR (%) 10.6 11.1 (50)bp 10.9 (30)bp

Profitability Ratios (%)Reported NIM 4.6 4.5 10bp 4.3 30bp

Cost-to-income ratio 47.9 51.4 (353)bp 49.5 (165)bp

Asset qualityGross NPAs (` cr) 2,719 2,335 16.5 2,086 30.3

Gross NPAs (%) 1.0 1.0 3bp 1.0 3bp

Net NPAs (`cr) 689 469 46.9 396 74.0

Net NPAs (%) 0.3 0.2 10bp 0.2 10bp

Provision Coverage Ratio (%) 74.7 79.9 (525)bp 81.0 (636)bp


Loan growth remains above industry

During 4QFY2013, the bank registered an above-industry average growth in

advances at 21.2% yoy, which was largely aided by robust traction in its retail loan

portfolio (up 3.0% qoq and 25.5% yoy).Within the retail loan portfolio, a strong

buildup was witnessed in Personal loans; while Business banking, Auto loans and

CVCE registered a healthy growth of 22.1%, 17.4% and 16.7% yoy respectively.

Home loans and Credit Cards grew by a strong 26.0% and 37.5% yoy. The Gold

loan portfolio grew by 37.2% yoy and now constitutes 3.4% of the total retail

advances (2.0% of total loan book).

Overall, the share of retail advances to overall loan book increased by around

200bp yoy to 54.3%. Within the retail loan book, the share of unsecured advances

(Personal loans and Credit Cards) increased sequentially to 20.8% from 20.2%.

On the liabilities front, the deposit growth was healthy at 17.8% yoy. The current

deposits accretion was moderate at 10.5% yoy, while savings deposits grew by a

healthy 16.7% yoy. The CASA ratio declined by around 127bp yoy to 44.7%.

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July 17, 2013 4

Exhibit 4:Strong growth in retail loans aides robust advance growthParticulars (` cr) 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy) % shareAuto Loans 32,310 30,942 4.4 27,513 17.4 23.0

CVCE 16,848 16,106 4.6 14,440 16.7 12.0

Two Wheelers 3,020 3,008 0.4 2,653 13.8 2.2

Personal Loans 18,586 17,500 6.2 14,776 25.8 13.2

Business Banking 23,866 24,516 (2.7) 19,541 22.1 17.0

Loans Against Securities 991 1,210 (18.1) 965 2.7 0.7

Credit Cards 10,571 10,114 4.5 7,686 37.5 7.5

Home loans 17,146 16,783 2.2 13,604 26.0 12.2

Gold 4,767 4,965 (4.0) 3,474 37.2 3.4

Others 12,337 11,243 9.7 7,224 70.8 8.8

Retail Advances 140,442 136,387 3.0 111,876 25.5 100.0Source: Company, Angel Research

NIM remains flat sequentially

The banks NIM remained flat sequentially at 4.6%. HDFC Bank has had a rapid

expansion of branches over the last two years (558 branches added in FY2012

and 518 branches added in FY2013). In 1QFY2014, the bank added only 57

branches, thereby taking the total branch network to 3,119. Of the total branch

additions over last one year, around 35% were micro branches (manned by 2-3

employees). Regionally, most of the expansion came in semi-urban and rural

areas. The banks increased geographic presence along with healthy network

expansion should aid it in maintaining an above-system average retail loan growthon the asset side and CASA accretion on the liability side. Going forward, the bank

plans to add 250-300 branches in the current fiscal.

Exhibit 5:Business growth remains robust


Exhibit 6:Reported NIM remains well above 4%

Source: Company, Angel Research, Note:*as per old reporting practices.

21.5

22.0

22.9

18.8

24.3

22.2

22.7

20.1

21.2

17.8

-

7.5

15.0

22.5

30.0

Advances Depos its

1QFY13 2QFY13 3QFY13 4QFY13 1QFY14(%)

4.60

4.20

4.30

4.60 4.6

4.0

4.1

4.24.3

4.4

4.5

4.6

4.7

1QFY13 2QFY13 3QFY13 4QFY13 1QFY14

(%)

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July 17, 2013 5

Exhibit 7:CASA ratio lower by 127bp yoy


Exhibit 8:CASA growth remains healthy for the bank


Exhibit 9:Capital adequacy remains healthy


Exhibit 10:Branch network growth slowing down


Non-interest income (excl. treasury) grew at moderate pace as

fee income and flat Forex income

During 1QFY2014, the non-interest income (excluding treasury) for the bank grew

at a moderate pace of 9.1% yoy, as fee income growth came in moderate at

11.7%, while forex income remained flat on a yoy basis. The bank reported

treasury gains of `200cr for the quarter compared to `67cr in 1QFY2013. Overall,

other income for the bank grew at a healthy pace of 16.8% yoy, during the quarter.

Exhibit 11:Non-interest income (excl. treasury) grew at moderate paceParticulars (` cr) 1QFY14 4QFY13 % chg (qoq) 1QFY13 % chg (yoy)Fees & Commission 1,285 1,383 (7.1) 1,150 11.7

Treasury Income 200 65 207.4 67 200.0

Forex Income & Others 314 201 56.1 315 (0.2)

Other 127 155 (17.7) 118 8.2

Other income 1,926 1,804 6.8 1,649 16.8Other income excl. treasury 1,726 1,739 (0.7) 1,583 9.1


46.0 45.9 45.447.4

44.7

35.0

40.0

45.0

50.0


(%)

15.114.5

20.3 16.7

-

10.0

20.0

30.0

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

CASA growth (%) SA growth (%)

10.9 11.4 10.9 11.1 10.6

4.65.6 6.1 5.7 5.4

15.517.0 17.0 16.8 16.0

-

5.0

10.0

15.0

20.0


Tier- I CAR (%) Tier- II CAR (%)

2,5

64

2,6

20

2,7

76

3,0

62

3,1

19

9,709 10,316 10,49010,743 11,088

1,500

3,500

5,500

7,500

9,500

11,500

13,500

1,000

1,500

2,000

2,500

3,000

3,500


Branches ATMs (RHS)

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July 17, 2013 6

Asset quality faces moderate pressure

On the asset quality front, the bank reported moderate pressure, as its Gross and

Net NPA levels, on an absolute basis, increased sequentially by around 16% and

47%, respectively. Its Gross NPA ratio remained flat at 1.0% sequentially, while the

Net NPA ratio increased by 10bp sequentially to 0.3%.The restructured advances

for the bank were at 0.2% of gross advances in 1QFY2014 as against 0.3% in

1QFY2013.

The bank has been able to maintain its asset quality consistently, as reflected in the

decline in slippages, ie from 5.2% in FY2009 to 1.0% in FY2013. Provisions to

average assets also declined from 1.2% in FY2009 to 0.5% in FY2013. Further, the

bank has been actively making floating provisions (cumulative of around `1,865cr,

as against `1,680cr a year ago) and going forward, even if specific credit costs

increase to normalized levels, the overall provisioning burden is expected to be

manageable due to the buffer created by these floating provisions.

Exhibit 12:Asset quality trends


1.0

0.9

1.0

1.0

1.0

0.2

0.2

0.2

0.2

0.3

81.081.9

79.679.9

74.7

60.0

70.0

80.0

90.0

0.0

0.3

0.6

0.9

1.2


Gross NPAs (%) Net NPAs (%) PCR (Calc, %, RHS)

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July 17, 2013 7

Investment arguments

Strong capital adequacy, expanding network, to sustain traction

in credit market share and CASA deposits, respectively

As of 1QFY2014, the banks capital adequacy as per Basel-III stood strong at

15.5%, with the tier-1 ratio at a comfortable 10.5%. On the back of such strong

CAR, we feel the bank is well positioned to continue its growth path and increase

its credit market share over FY2014-15.

The banks strong and profitable growth over FY200513 is supported by

significant traction in the CASA market share (from 3.3% in FY2005 to ~6.2% in

FY2013). The dominant transaction banking business lies at the core of the banks

strength in CASA deposits. Moreover, aided by the merger of the Centurion Bank of

Punjab, the banks branch network moved up at around 27% CAGR during

FY200513.

During the past one year, the bank increased its presence in 475 new towns/cities.

The banks increased geographic presence along with healthy network expansion

should aid it in maintaining above system-average retail loan growth on the asset

side and CASA accretion on the liability side.

Comprehensive product portfolio, effective cross-selling to

sustain traction in fee income

Apart from the traditional CEB (commission, exchange & brokerage) and forex

income, the bank earns substantial fee income from transaction banking, cards

and third-party distribution, among others. Overall, the banks core fee incomeposted a 31.2% CAGR over FY200813 and stands at 1.8% of average total assets

(ATA) for FY2013, one of the best in the sector offering another significant

competitive advantage to the bank. The banks major proportion of fee income

(~80-90%) comes from the retail asset side. Strong growth in retail loan book over

the past year (25.5% yoy) coupled with potential fee income revenue from new

branch additions (though with a lag) should help the bank maintain its fee income

to average assets at 1.8% over FY2014-15 as well.

Asset quality face moderate pressures

The bank has been able maintain it asset quality consistently, as reflected in thedecline in slippages, ie from 5.2% in FY2009 to 1.0% in FY2013. Provisions to

average assets also declined from 1.2% in FY2009 to 0.5% in FY2013. Further, the

bank has been actively making floating provisions (cumulative of around `1,865cr,

as against `1,680cr a year ago) and going forward, even if specific credit costs

increase to normalized levels, the overall provisioning burden is expected to be

manageable due to the buffer created by these floating provisions.

Outlook & Valuation

We believe HDFC Bank is among the most competitive banks in the sector, with an

A-list Management at the helm of affairs, which has one of the best track records

in the sector. We believe the bank is well positioned for high qualitative growth,

with strong CAR, and robust asset quality.

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July 17, 2013 8

Relative to the rest of the banking sector, the banks asset quality remains superior

and is likely to outperform in the current environment. Given the challenging

macro-economic developments, we believe within the banking sector defensive

stocks like HDFC Bank are likely to outperform rest of the banking sector goingforward. Also, with minimal NPA issues over the past couple of years, unlike other

banks, the bank had substantial management bandwidth to continue laying the

building blocks for organic growth and market share gains. This should place it

better than peers from a relative growth stand-point as well. At the current market

price, HDFC Bank is trading at a one-year forward P/ABV of 3.6x (3.1x FY2015E

ABV). We recommend an Accumulate rating on the stock, with a target price of`752.Exhibit 13:Key assumptionsParticulars (%) Earlier estimates Revised estimatesFY2014 FY2015 FY2014 FY2015Credit growth 25.0 25.0 25.0 25.0

Deposit growth 25.0 25.0 25.0 25.0

CASA ratio 45.7 45.1 45.7 45.1

NIMs 4.6 4.6 4.6 4.6

Other income growth 19.6 22.0 17.1 18.3

Growth in staff expenses 16.0 20.0 15.0 17.5

Growth in other expenses 18.0 20.0 15.0 17.5

Slippages 1.2 1.3 1.2 1.3

Coverage ratio 79.0 79.0 70.3 70.3

Source: Angel Research

Exhibit 14:Change in estimatesParticulars (` cr)

FY2014 FY2015Earlierestimates Revisedestimates Var. (%) Earlierestimates Revisedestimates Var. (%)

NII 19,365 19,365 - 23,767 23,767 -

Non-interest income 8,195 8,027 (2.1) 9,998 9,496 (5.0)

Operating income 27,560 27,392 (0.6) 33,766 33,264 (1.5)Operating expenses 13,179 12,922 (2.0) 15,815 15,183 (4.0)

Pre-prov. profit 14,381 14,470 0.6 17,951 18,081 0.7Provisions & cont. 1,767 1,765 (0.1) 2,184 2,184 0.0

PBT 12,614 12,706 0.7 15,767 15,897 0.8

Prov. for taxes 3,973 4,066 2.3 5,045 5,166 2.4

PAT 8,640 8,640 (0.0) 10,722 10,730 0.1Source: Angel Research

Exhibit 15:Angel EPS forecast vs. consensusYear (`) Angel forecast Bloomberg consensus Var. (%)FY2014E 36.3 35.5 2.2

FY2015E 45.1 44.7 0.9

Source: Bloomberg, Angel Research

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July 17, 2013 9

Exhibit 16:P/ABVband


Exhibit 17:P/E band


Exhibit 18:HDF Bank Premium/Discount to the Sensex (%)

Source: Bloomberg, Angel Research

0

200

400

600

800

1,000

1,200

Apr-06

Sep-0

6

Feb-0

7

Jul-07

Dec-0

7

May-0

8

Oct-08

Mar-09

Aug-0

9

Jan-1

0

Jun-1

0

Nov-1

0

Apr-11

Sep-1

1

Feb-1

2

Jul-12

Dec-1

2

May-1

3

Oct-13

Mar-14

Price (`) 2.00x 2.75x 3.50x 4.25x 5.00x

0

150

300

450

600

750

900

1,050

1,200

1,350

Jan-0

5

Jul-05

Jan-0

6

Jul-06

Jan-0

7

Jul-07

Jan-0

8

Jul-08

Jan-0

9

Jul-09

Jan-1

0

Jul-10

Jan-1

1

Jul-11

Jan-1

2

Jul-12

Jan-1

3

Jul-13

Price (`) 15x 20x 25x 30x

(30)

(20)

(10)

0

10

20

30

40

50

6070

Sep-0

6

Dec-0

6

Mar-07

Jun-0

7

Sep-0

7

Dec-0

7

Mar-08

Jun-0

8

Sep-0

8

Dec-0

8

Mar-09

Jun-0

9

Sep-0

9

Dec-0

9

Mar-10

Jun-1

0

Sep-1

0

Dec-1

0

Mar-11

Jun-1

1

Sep-1

1

Dec-1

1

Mar-12

Jun-1

2

Sep-1

2

Dec-1

2

Mar-13

Jun-1

3

Premium/Discount to Sensex Avg. His torical Premium(%)

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July 17, 2013 10

Exhibit 19:Recommendation summaryCompany Reco. CMP(`) Tgt. price(`) Upside(%) FY2015EP/ABV (x) FY2015ETgt. P/ABV (x) FY2015EP/E (x) FY2013-15EEPS CAGR (%) FY2015ERoA (%) FY2015ERoE (%)AxisBk Buy 1,193 1,498 26 1.3 1.6 7.4 20.8 1.6 18.5

FedBk Accumulate 368 409 11 0.8 0.9 6.5 7.5 1.1 13.1

HDFCBk Accumulate 663 745 12 3.1 3.5 14.7 26.3 1.9 22.8ICICIBk* Buy 980 1,219 24 1.4 1.7 9.8 17.4 1.6 16.2

SIB Neutral 22 - - 0.8 - 5.3 5.7 0.9 16.2

YesBk Neutral 427 - - 1.8 - 8.6 17.1 1.3 22.8

AllBk Accumulate 84 95 13 0.4 0.4 2.5 18.3 0.7 13.6

AndhBk Neutral 77 - - 0.5 - 3.4 (0.3) 0.7 13.2

BOB Buy 549 642 17 0.6 0.7 3.8 16.8 0.9 16.0

BOI Accumulate 214 236 10 0.5 0.5 3.1 21.6 0.7 15.1

BOM Accumulate 49 54 10 0.5 0.6 3.8 10.0 0.6 15.3

CanBk Neutral 319 - - 0.5 - 3.7 15.4 0.8 14.2CentBk Neutral 61 - - 0.5 - 3.2 52.3 0.6 14.3

CorpBk Buy 326 379 16 0.4 0.5 3.1 5.7 0.7 14.2

DenaBk Accumulate 66 70 6 0.4 0.4 2.7 3.7 0.7 14.7

IDBI# Neutral 69 - - 0.4 - 3.0 27.1 0.8 13.5

IndBk Accumulate 106 113 6 0.4 0.4 2.6 7.0 0.9 14.7

IOB Neutral 47 - - 0.3 - 2.4 78.9 0.6 13.0

J&KBk Neutral 1,242 - - 0.9 - 5.9 (1.7) 1.2 16.8

OBC Buy 173 203 17 0.4 0.4 2.8 17.0 0.8 12.9

PNB Buy 621 718 16 0.6 0.7 3.5 14.5 1.1 16.5

SBI* Buy 1,807 2,126 18 1.0 1.2 6.3 17.5 1.0 17.0

SynBk Accumulate 108 121 11 0.5 0.6 3.9 (8.5) 0.6 14.6

UcoBk Neutral 64 - - 0.7 - 4.1 67.5 0.6 13.6

UnionBk Buy 156 186 19 0.5 0.6 3.3 14.7 0.7 15.2

UtdBk Accumulate 45 51 13 0.3 0.4 2.2 54.6 0.6 14.7

VijBk Accumulate 44 47 7 0.5 0.5 4.1 9.5 0.4 11.5

Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF

Company Background

HDFC Bank is the second-largest private sector bank in India with a pan-India

network of 3,119 branches and nearly 11,088 ATMs. The bank is promoted and23% owned by HDFC, India's largest housing Finance Company. HDFC Bank has

been at the forefront of modern retail banking in India. The bank has pioneered

the transaction banking model in India, which has enabled it to garner substantial

CASA deposits as well as fee income, while the focus on retail lending (which

forms more than 50% of total loans) has further helped the bank in maintaining

above-industry margins.

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July 17, 2013 11

Income statement

Y/E March (` cr) FY09 FY10 FY11 FY12 FY13 FY14E FY15ENet Interest Income 7,421 8,386 10,543 12,885 15,811 19,365 23,767- YoY Growth (%) 42.0 13.0 25.7 22.2 22.7 22.5 22.7Other Income 3,471 3,983 4,335 5,784 6,853 8,027 9,496- YoY Growth (%) 57.4 14.8 8.8 33.4 18.5 17.1 18.3

Operating Income 10,892 12,370 14,878 18,668 22,664 27,392 33,264- YoY Growth (%) 46.5 13.6 20.3 25.5 21.4 20.9 21.4

Operating Expenses 5,685 5,940 7,153 9,278 11,236 12,922 15,183- YoY Growth (%) 51.8 4.5 20.4 29.7 21.1 15.0 17.5

Pre - Provision Profit 5,207 6,430 7,725 9,391 11,428 14,470 18,081- YoY Growth (%) 41.2 23.5 20.2 21.6 21.7 26.6 24.9

Prov. & Cont. 1,908 2,141 1,907 1,877 1,677 1,765 2,184- YoY Growth (%) 35.6 12.2 (10.9) (1.5) (10.7) 5.2 23.8

Profit Before Tax 3,299 4,289 5,819 7,513 9,751 12,706 15,897- YoY Growth (%) 44.6 30.0 35.7 29.1 29.8 30.3 25.1

Prov. for Taxation 1,054 1,340 1,892 2,346 3,024 4,066 5,166- as a % of PBT 32.0 31.3 32.5 31.2 31.0 32.0 32.5

PAT 2,245 2,949 3,926 5,167 6,726 8,640 10,730- YoY Growth (%) 41.2 31.3 33.2 31.6 30.2 28.5 24.2

Balance sheetY/E March (` cr) FY09 FY10 FY11 FY12 FY13 FY14E FY15EShare Capital 425 458 465 469 476 476 476

Reserves & Surplus 14,627 21,065 24,914 29,455 35,738 42,403 50,685

Deposits 142,812 167,404 208,586 246,706 296,247 370,309 462,886

- Growth (%) 41.7 17.2 24.6 18.3 20.1 25.0 25.0

Borrowings 2,686 7,012 7,447 13,250 16,963 22,219 27,372

Tier 2 Capital 6,478 5,904 6,947 10,597 16,044 15,643 15,252

Other Liab. & Prov. 16,243 20,616 28,993 37,432 34,864 42,696 51,590

Total Liabilities 183,271 222,459 277,353 337,910 400,332 493,745 608,260Cash Balances 13,527 15,483 25,101 14,991 14,627 16,664 20,830

Bank Balances 3,979 14,459 4,568 5,947 12,653 15,605 19,224

Investments 58,818 58,608 70,929 97,483 111,614 135,140 160,888

Advances 98,883 125,831 159,983 195,420 239,721 299,651 374,564- Growth (%) 55.9 27.3 27.1 22.2 22.7 25.0 25.0

Fixed Assets 1,707 2,123 2,171 2,347 2,703 3,234 3,864

Other Assets 6,357 5,955 14,601 21,722 19,014 23,451 28,890

Total Assets 183,271 222,459 277,353 337,910 400,332 493,745 608,260- Growth (%) 37.6 21.4 24.7 21.8 18.5 23.3 23.2

7/28/2019 HDFC Bank, 1Q FY 2014

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July 17, 2013 12

Ratio analysis

Y/E March FY09 FY10 FY11 FY12 FY13 FY14E FY15EProfitability ratios (%)NIMs 4.9 4.3 4.4 4.5 4.6 4.6 4.6Cost to Income Ratio 52.2 48.0 48.1 49.7 49.6 47.2 45.6

RoA 1.4 1.5 1.6 1.7 1.8 1.9 1.9

RoE 16.9 16.1 16.7 18.7 20.3 21.8 22.8

B/S ratios (%)CASA Ratio 44.4 52.0 52.7 48.4 47.4 45.7 45.1

Credit/Deposit Ratio 69.2 75.2 76.7 79.2 80.9 80.9 80.9

CAR 15.1 17.4 16.2 16.5 16.8 15.3 14.2

- Tier I 10.2 13.3 12.2 11.6 11.1 10.7 10.4

Asset Quality (%)Gross NPAs 2.0 1.4 1.0 1.0 1.0 1.2 1.2

Net NPAs 0.6 0.3 0.2 0.2 0.2 0.3 0.4

Slippages 5.3 2.6 1.1 1.0 1.0 1.2 1.3

Loan Loss Prov. /Avg. Assets 1.0 1.0 0.3 0.4 0.3 0.3 0.3

Provision Coverage 68.4 78.4 82.5 82.3 79.3 70.3 64.5

Per Share Data (`)EPS 10.6 12.9 16.9 22.0 28.3 36.3 45.1

ABVPS (75% cover.) 70.2 94.0 109.1 127.5 152.2 179.5 212.9

DPS 1.7 2.4 3.3 4.3 5.5 7.1 8.8

Valuation RatiosPER (x) 62.8 51.4 39.3 30.1 23.4 18.2 14.7

P/ABVPS (x) 9.4 7.0 6.1 5.2 4.4 3.7 3.1

Dividend Yield 0.3 0.4 0.5 0.7 0.8 1.1 1.3

DuPont AnalysisNII 4.7 4.1 4.2 4.2 4.3 4.3 4.3

(-) Prov. Exp. 1.2 1.1 0.8 0.6 0.5 0.4 0.4

Adj. NII 3.5 3.1 3.5 3.6 3.8 3.9 3.9

Treasury 0.3 0.2 (0.0) (0.0) 0.0 0.0 0.0

Int. Sens. Inc. 3.7 3.3 3.4 3.5 3.9 4.0 3.9

Other Inc. 1.9 1.8 1.8 1.9 1.8 1.8 1.7

Op. Inc. 5.7 5.0 5.2 5.5 5.7 5.7 5.6

Opex 3.6 2.9 2.9 3.0 3.0 2.9 2.8PBT 2.1 2.1 2.3 2.4 2.6 2.8 2.9

Taxes 0.7 0.7 0.8 0.8 0.8 0.9 0.9

RoA 1.4 1.5 1.6 1.7 1.8 1.9 1.9Leverage 11.9 11.1 10.7 11.1 11.2 11.3 11.7

RoE 16.9 16.1 16.7 18.7 20.3 21.8 22.8Note: FY2013 onwards ratios reflect revised accounting practices

7/28/2019 HDFC Bank, 1Q FY 2014

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J l 17 2013 13

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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Disclosure of Interest Statement HDFC Bank

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2. Angel and its Group companies ownership of the stock No

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Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

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hdfc bank, 1q fy 2014

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