HDFC Bank Ltd. is India’s leading private bank with banking network of 7,945 branches and 20,596 ATMs in 3,836 cities/towns. It offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments: Wholesale Banking Services, Retail Banking Services and Treasury. The services offered by the bank include Personal Accounts & Deposits, Loans, Cards, Forex, Investments and Insurance.
|Result Analysis: HDFC bank (CMP: Rs.1529.50)||Result Update: Q2FY24|
|Market Cap. (Cr.)||1159638.75|
|52 Wk. high/low||1758 / 1427|
|Book Value (Rs)||552.54|
- HDFC bank reported a healthy first quarter with consistent operating profit and strong business growth. Bank’s PAT grew by 50.6% YoY to Rs.15,976 cr. on the back of lower provisioning while the Interest income grew hugely by 75.4% YoY to Rs.67,698 cr.
- On a standalone basis, Net Interest Income grew by 30.3% YoY to Rs.27,385 cr. while Net Interest Margin declined to 3.4% due to ICRR and excess liquidity in the economy.
- On Pro-forma basis, Gross advances grew by 1.08 lakh cr. in the quarter to Rs.21,72,858 cr., an increase of 4.9% QoQ. This growth was led by CRB (9.7% QoQ) & retail (3.1% QoQ), while wholesale grew by 5.8% QoQ.
- On yearly basis, Domestic retail loans grew by 20%, commercial and rural banking loans grew by 29.1% and corporate and other wholesale loans grew by 11.2%. Overseas advances constituted 2.6% of total advances.
- Asset quality of the bank has improved on the pro-forma basis with Gross NPA at 1.3% Vs 1.4% QoQ and Net NPA ratio at 0.3% Vs 0.4% QoQ. Among GNPA segment, retail and commercial & rural banking (ex-agri) improved while commercial & rural banking and wholesale segment grew slightly.
- On Pro-forma basis, CASA ratio declined by 170 bps to 37.6% in Q2FY24 vs 39.4% in Q1FY24 mainly due to higher interest rates on fixed deposits. The cost to income ratio of the bank also improved significantly from 42.8% to 40.4%.
- HDB Financial Services, subsidiary of HDFC Bank reported robust growth of 43% YoY in disbursements across segments.
- Bank has added 85 new branches in the quarter and also added 6 mn customers to its customer’s base making it to 91 mn.
Conference Call Highlights:
- The business momentum has continued to gain pace in the merger quarter with disbursements reaching new high of Rs.480 bn.; ~83-85% of deposits were retail. Change in mix toward more on retail will lead to better margins going forward.
- The cost to income ratio improved to 40.4% as a merged entity riding on HDFC’s low numbers, management aim to get it to mid-30s as part of a long term vision.
- NIMs are impacted by 25bp due to excess liquidity & impact of incremental CRR.
- RoE/RoA stood at 16.2%/2% in 2QFY24 and are expected to improve going forward. The bank aims for ROA of 1.9%-2.1% by end of FY24.
- Management would continue to focus on digital and technology front, PayZapp 2.0 app has currently 3mn users and handles 0.25mn transactions per day. AI driven channel platform, WhatsApp and chat banking are working smoothly.
HDFC Bank, world’s fourth largest bank reported above market estimates results in the Q2FY24 with 50.6% YoY growth in the Net profits, supported by lower provisioning and lower tax rate in the quarter. After merger, mortgages account for 60% of the retail loan book which would benefit the bank with steady stream of income and risk minimization over the long term. Impressive asset management of the bank is evident through its strong asset quality which were above estimates. Bank’s NIM reached to the low of 3.4% and is expected to improve in the coming quarters on behalf of removal of ICRR. The current P/B ratio stands at 2.77 which is significantly below of 1-yr and 3-yr median P/B of 3.3 and 3.56 respectively. Hence, we remain long on the stock with target price of Rs.1760 for period of 12 months.
|Particulars (In Rs. Cr.)||Q2FY24||Q1FY24||Q2FY23||QoQ%||YoY%||H1FY24||H1FY23||YoY%|
|Net Interest Income||27,385||23,599||21,021||16.0%||30.3%||50,984||40,503||25.9%|
|Net Profit after tax||15,976||11,952||10,606||33.7%||50.6%||27,928||19,802||41.0%|
|Gross NPA||1.34||1.17||1.23||17 bps||11 bps|
|Net NPA||0.35||0.30||0.33||5 bps||2 bps|
|Net Interest Margin||3.40||4.10||4.10||-70 bps||-70 bps|
|Capital Adequacy Ratio||19.5||18.9||18.0||60 bps||146 bps|
|CASA Ratio||37.6||42.5||45.4||-490 bps||-780 bps|
Source: Company website, EWL Research
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