Q2FY2019 Result Update | Banking
Oct 20, 2018
HDFC Bank
BUY
CMP
`1,965
Performance Highlights
Target Price
`2,350
Particulars (` cr)
Q2FY19
Q1FY19
% chg (qoq)
Q2FY18
% chg (yoy)
Investment Period
12 Months
NII
11,763
10,814
8.8
9,752
20.6
Pre-prov. profit
9,480
8,648
9.6
7,818
21.3
Stock Info
PAT
5,006
4,601
8.8
4,151
20.6
Source: Company, Angel Research
Sector
Banking
HDFC Bank delivered steady performance for Q2FY19, with PAT growth of 20.6%
Market Cap (` cr)
5,34,142
yoy. On the operating front, the bank reported 20.6% yoy growth in NII. NIM, at
Beta
1.1
4.37% was down by 17bps qoq & increased by 10bps yoy. The bank managed to
52 Week High / Low
2,219/1,685
reduce its expenses and brought down the cost/income ratio from 41.5% in
Avg. Daily Volume
1,59,470
Q2FY18 to 39.9% in Q2FY19.
Face Value (`)
2
BSE Sensex
34,316
Healthy operating profit growth; Asset quality stable
Nifty
10,304
Reuters Code
HDBK.NS
During Q2FY19, the bank’s advances grew by 24.1% yoy, of which retail loan
Bloomberg Code
HDFCB:IN
book increased 23.3% yoy to constitute 55% of the total advances. The wholesale
loans inched up by 25.8% yoy. The net interest income during this period grew by
20.6% yoy, which is not congruent to the advances growth. NIM compress on yoy
Shareholding Pattern (%)
basis, largely owing to increase in cost of fund, lower growth of CASA and
pressure on advance yield. However, NIM inched up 17bps qoq primarily owing to
Promoters
20.9
commensurate increase in advance yield compare to cost of fund and capital
MF / Banks / Indian Fls
17.1
raising during the quarter. Moreover, a slower rise in opex aided lower
FII / NRIs / OCBs
52.0
cost/income by 160bps yoy to 40.9% in Q1FY19.
Indian Public / Others
10.1
Total deposits surged by 20.9% yoy and 3.4% qoq in 12FY19. CASA deposits
accounted for 42% of the total deposits.
On asset quality front, the bank continued to maintain strong asset quality with a
Abs. (%)
3m
1yr
3yr
GNPA/NPA ratio of 1.33%/0.4% of loans. Total slippages for the quarter were
Sensex
(5.6)
5.9
25.4
`3,225cr vs. `3,580cr qoq.
HDFC Bank
(10.1)
6.2
79.3
Outlook & Valuation: Credit growth beat the industry growth rate, driven by strong
retail business. The Strong liability franchise and healthy capitalisation provides
strong earning visibility. We value the bank’s subsidiaries at `121/share and the
3-year price chart
2500
core bank at `2,228/share (3.7x FY2020E ABV). We recommend Buy rating on
2000
the stock with a target price of `2,350/share.
1500
1000
Exhibit 1: Key Financials
500
Y/E March (` cr)
FY16
FY17
FY18
FY19E
FY20E
0
NII
27,592
33,139
40,092
47,565
56,268
% chg
23.6
20.1
21.0
18.6
18.3
Net profit
12,296
14,549
17,486
21,153
26,282
Source: Company, Angel Research
% chg
21.2
18.3
20.2
21.0
24.2
NIM (%)
4.5
4.5
4.4
4.3
4.3
EPS ( Rs)
48.6
56.8
67.5
77.8
96.7
P/E (x)
40.4
34.6
29.1
25.2
20.3
P/ABV (x)
7.0
6.0
4.9
3.8
3.3
Jaikishan Parmar
RoA (%)
1.9
1.9
1.8
1.8
1.9
Research Analyst
RoE (%)
18.3
18.3
18.2
16.9
16.9
022 - 39357600 Ext: 6810
Note - CMP as on 19/10/18
Please refer to important disclosures at the end of this report
1
HDFC Bank | Q2FY2019 Result Update
Exhibit 1: Quarterly Result Summary
Particulars (` cr)
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q2FY19
% QoQ
% YoY
Interest earned
18,668
19,670
20,581
21,319
22,549
24,200
7.3
23.0
- on Advances / Bills
14,486
15,356
16,157
16,663
17,391
18,828
8.3
22.6
- on investments
3,892
4,006
4,100
4,222
4,589
5,042
9.9
25.9
- on balance with RBI & others
108
106
112
196
332
94
-71.8
-12.1
- on others
181
202
212
238
237
236
-0.2
17.1
Interest Expended
9,298
9,918
10,267
10,663
11,735
12,436
6.0
25.4
Net Interest Income
9,370
9,752
10,314
10,656
10,814
11,763
8.8
20.6
Other income
3,516
3,606
3,868
4,229
3,818
4,016
5.2
11.4
- Fee & commission income
2,578
2,614
2,872
3,330
3,171
3,296
3.9
26.1
- Treasury income
331
356
259
(22)
(283)
(33)
-88.4
-109.2
- Forex & derivative income
297
384
426
416
500
420
-16.0
9.3
Others
310
252
311
505
431
333
-22.7
32.1
C/I%
42
41.5
40
41
41
39.9
-2.4
-3.7
Operating income
12,886
13,358
14,182
14,885
14,632
15,779
7.8
18.1
Operating expenses
5,367
5,540
5,732
6,050
5,984
6,299
5.3
13.7
- Employee expenses
1,658
1,716
1,691
1,741
1,811
1,909
5.5
11.3
- Other Opex
3,710
3,824
4,041
4,309
4,173
4,390
5.2
14.8
Pre-provision Profit
7,519
7,818
8,450
8,835
8,648
9,480
9.6
21.3
Provisions & Contingencies
1,559
1,476
1,351
1,541
1,629
1,820
11.7
23.3
PBT
5,960
6,342
7,099
7,294
7,018
7,660
9.1
20.8
Provision for Tax
2,067
2,191
2,457
2,495
2,417
2,654
9.8
21.2
PAT
3,893
4,151
4,641
4,799
4,601
5,006
8.8
20.6
Effective Tax Rate (%)
35
35
35
34
34
35
Balance Sheet
Advance
5,80,976
6,04,867
6,31,215
6,58,333
7,08,649
7,50,838
6.0
24.1
Investment
2,16,108
2,40,279
2,32,724
2,42,200
2,75,679
3,00,086
8.9
24.9
Borrowing
86,012
1,01,531
1,03,867
1,23,105
1,21,024
1,42,719
17.9
40.6
Deposit
6,71,376
6,89,346
6,99,026
7,88,770
8,05,785
8,33,364
3.4
20.9
CA
1,02,030
97,825
1,01,286
1,19,283
1,09,297
1,15,131
5.3
17.7
SA
1,93,105
1,97,655
2,05,833
2,23,810
2,26,656
2,34,568
3.5
18.7
CASA
2,95,135
2,95,480
3,07,119
3,43,093
3,35,953
3,49,699
4.1
18.3
Profitability
Advance Yield
10.2
10.4
10.5
10.3
10.18
10.32
14bp
(4)bp
Investemnt Yield
7.2
7.0
6.9
7.1
7.1
7.0
(8)bp
(2)bp
NIM
4.48
4.47
4.60
4.42
4.20
4.37
17bp
(10)bp
COF
5.0
5.1
5.2
5.0
5.11
5.23
12bp
10bp
Spread
5.2
5.2
5.3
5.4
5.1
5.1
2bp
(14)bp
RoA
1.8
1.8
2.0
1.9
1.7
1.8
6bp
(4)bp
RoE
16.4
16.9
17.9
18.1
17.2
16.4
(85)bp
(51)bp
Asset Quality
GNPA
7,243
7,703
8,235
8,607
9,539
10,098
5.9
31.1
GNPA
2,528
2,599
2,774
2,601
2,907
3,028
4.2
16.5
NPA%
1.2
1.3
1.3
1.3
1.3
1.33
(2)bp
7bp
GNPA%
0.44
0.43
0.44
0.40
0.41
0.400
(1)bp
(3)bp
Slippage (%)
2.6
2.0
1.5
1.5
2.0
1.7
(30)bp
(28)bp
Source: Company
Oct 20, 2018
2
HDFC Bank | Q2FY2019 Result Update
Exhibit 2: Total Retail loans - as per internal classification
Particular (` cr)
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q2FY19
% QoQ
% YoY
Auto
73,746
78,999
82,510
85,974
88,320
91,920
4.1
16.4
Personal Loans
56,067
61,313
67,490
72,442
78,542
84,145
7.1
37.2
Home Loans
38,797
40,029
38,130
36,265
44,036
47,875
8.7
19.6
Business Banking
88,088
96,485
1,00,810
1,09,507
1,09,551
1,17,039
6.8
21.3
Kisan Gold Card
28,132
31,729
31,307
35,497
33,783
37,068
9.7
16.8
Credit Cards
29,101
30,831
33,622
36,115
38,792
40,535
4.5
31.5
CV/CE
38,450
40,361
42,548
45,939
47,167
49,548
5.0
22.8
Others
15,906
16,493
18,061
53,288
20,362
21,023
3.2
27.5
Two Wheelers
7,724
8,535
9,220
9,648
10,324
11,290
9.4
32.3
Gold Loans
5,130
5,251
5,299
5,399
5,529
5,701
3.1
8.6
Loans against securities
2,956
3,219
3,458
3,866
3,552
3,580
0.8
11.2
Total Retail Advances
3,84,097
4,13,245
4,32,455
4,93,940
4,79,958
5,09,724
6.2
23.3
Corporate & International
1,96,879
1,91,622
1,98,755
1,64,393
2,28,691
2,41,114
5.4
25.8
Total loans
5,80,976
6,04,867
6,31,210
6,58,333
7,08,649
7,50,838
6.0
24.1
Source: Company
Outlook & Valuation: Credit growth beat the industry growth rate, driven by
strong retail business. The Strong liability franchise and healthy capitalisation
provides strong earning visibility. We value the bank’s subsidiaries at
`121/share and the core bank at `2,228/share (3.7x FY2020E ABV). We
recommend Buy rating on the stock with a target price of `2,350/share.
Exhibit 3:
Particulars
%Valuation Methodology Value/share (`)
Value of HDFC Bank standalone
100
3.7x FY20E ABV
2229
Subsidiaries
HDB Fin
96%
4x FY20E ABV
111
HDFC Sec
98%
25x of FY20 PAT
40
Total subsidiaries' value @ 20% discount
121
Fair value per share
2350
Source: Company
Oct 20, 2018
3
HDFC Bank | Q2FY2019 Result Update
Income Statement
Y/E March (` cr)
FY16
FY17
FY18
FY19E
FY20E
Net Interest Income
27,592
33,139
40,092
47,565
56,268
- YoY Growth (%)
23.6
20.1
21.0
18.6
18.3
Other Income
10,752
12,296
15,221
16,939
20,793
- YoY Growth (%)
19.5
14.4
23.8
11.3
22.7
Operating Income
38,343
45,435
55,313
64,504
77,061
- YoY Growth (%)
22.4
18.5
21.7
16.6
19.5
Operating Expenses
16,980
19,703
22,690
25,998
30,990
- YoY Growth (%)
21.4
16.0
15.2
14.6
19.2
Pre - Provision Profit
21,364
25,732
32,623
38,506
46,071
- YoY Growth (%)
23.2
20.4
26.8
18.0
19.6
Prov. & Cont.
2,726
3,593
5,927
6,596
6,845
- YoY Growth (%)
31.3
31.8
65.0
11.3
3.8
Profit Before Tax
18,638
22,139
26,696
31,910
39,226
- YoY Growth (%)
22.1
18.8
20.6
19.5
22.9
Prov. for Taxation
6,342
7,589
9,210
10,758
12,945
- as a % of PBT
34.0
34.3
34.5
33.7
33.0
PAT
12,296
14,549
17,486
21,153
26,282
- YoY Growth (%)
21.2
18.3
20.2
21.0
24.2
Source: Company
Balance Sheet
Y/E March (` cr)
FY16
FY17
FY18
FY19E
FY20E
Share Capital
506
513
518
543
543
Reserves & Surplus
72,172
85,502
1,05,776
1,43,942
1,65,614
Net Worth
72,678
86,014
1,06,294
1,44,486
1,66,157
Deposits
5,46,424
6,43,640
7,88,770
9,30,749
11,16,898
- Growth (%)
21.2
17.8
22.5
18.0
20.0
Borrowings
53,018
74,029
1,23,105
1,23,790
1,56,366
Other Liab & Prov.
36,725
56,709
45,764
74,460
89,352
Total Liabilities
7,08,846
8,60,392
10,63,933
12,73,484
15,28,773
Cash balances
30,058
37,897
1,04,670
51,191
61,429
Bank balances
8,861
11,055
18,244
14,892
17,870
Investments
1,63,886
2,14,463
2,42,200
3,07,147
3,68,576
Advances
4,64,594
5,54,568
6,58,333
8,03,166
9,79,863
- Growth (%)
27.1
19.4
18.7
22.0
22.0
Fixed Assets
3,343
3,627
3,607
5,771
6,925
Other Assets
38,104
38,782
36,879
91,317
94,110
Total Assets
7,08,846
8,60,392
10,63,933
12,73,484
15,28,773
- Growth (%)
20.0
21.4
23.7
19.7
20.0
Source: Company
Oct 20, 2018
4
HDFC Bank | Q2FY2019 Result Update
Key Ratio
Y/E March
FY16
FY17
FY18
FY19E
FY20E
Profitability Ratios (%)
NIMs
4.5
4.5
4.4
4.3
4.3
Cost to Income Ratio
44.3
43.4
41.0
40.3
40.2
RoA
1.9
1.9
1.8
1.8
1.9
RoE
18.3
18.3
18.2
16.9
16.9
B/S ratios (%)
CASA Ratio
43.2
48.0
43.5
45.0
45.0
Credit/Deposit Ratio
85.0
86.2
83.5
86.3
87.7
CAR
15.5
14.7
17.3
16.7
16.2
- Tier I
13.2
12.9
15.8
15.4
15.1
Asset Quality (%)
Gross NPAs
0.9
1.1
1.3
1.3
1.3
Net NPAs
0.3
0.3
0.4
0.4
0.4
Slippages
1.6
1.5
1.5
1.0
1.0
Loan Loss Prov./Avg. Assets
0.6
0.6
0.9
0.8
0.7
Provision Coverage
70
69
69
69
69
Per Share Data (`)
EPS
48.6
56.8
67.5
77.8
96.7
BVPS
287
336
410
532
612
ABVPS
282
328
400
520
600
DPS
9.5
11.5
13.5
13.5
14.5
Valuation Ratios
PER (x)
40.4
34.6
29.1
25.2
20.3
P/BVPS (x)
6.8
5.9
4.8
3.7
3.2
P/ABVPS (x)
7.0
6.0
4.9
3.8
3.3
Dividend Yield
0.5
0.6
0.7
0.7
0.7
DuPont Analysis (%)
Interest Income
9.3
8.8
8.3
8.3
8.2
Interest Expenses
5.0
4.6
4.2
4.2
4.2
NII
4.2
4.2
4.2
4.1
4.0
Non Interest Income
1.7
1.6
1.6
1.4
1.5
Total Revenues
5.9
5.8
5.7
5.5
5.5
Operating Cost
2.6
2.5
2.4
2.2
2.2
PPP
3.3
3.3
3.4
3.3
3.3
Total Provisions
0.4
0.5
0.6
0.6
0.5
PreTax Profit
2.9
2.8
2.8
2.7
2.8
Tax
1.0
1.0
1.0
0.9
0.9
ROA
1.9
1.9
1.8
1.8
1.9
Leverage
9.6
9.9
10.0
9.3
9.0
RoE (%)
18.3
18.3
18.2
16.9
16.9
Source: Company
Oct 20, 2018
5
HDFC Bank | Q2FY2019 Result Update
Research Team Tel: 022 - 39357800
DISCLAIMER
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been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its
associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered
by Analyst during the past twelve months.
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Disclosure of Interest Statement
HDFC Bank
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15)
