1
Please refer to important disclosures at the end of this report
1
1
Particulars (` cr)
Q 2FY20
Q 1FY20
% chg (qoq)
Q 2FY19
% chg (yoy)
NII
13,515
13,294
1.7
11,763
14.9
Pre-prov. profit
11,698
11,147
4.9
9,480
23.4
PAT
6,345
5,568
14.0
5,006
26.8
Source: Company
For Q2FY2020, HDFC Bank yet again reported a very strong set of operating
numbers coupled with stable GNPA/NPA. Advances grew by 19.5% yoy,
However, NII growth moderated at 15% owing to drop in advance yield and
higher growth in term deposits. Deposits grew at 22.6% yoy (7% qoq) owing to
28% yoy growth in term deposit. CASA mix declined 268bps qoq to 39.3% (42%
in 4QFY2019).
Loan growth remained strong led by pick up in corporate loan book: Softening of
auto loan segment (contributes 27% of retail loans), which grew 2.3% yoy
(declined qoq) led to moderate growth in advances. Home loan and credit card
loan have reported healthy growth of 25.4% and 28.4% yoy, respectively.
Wholesale loan grew by 27.9%, while retail loans moderated to 14.7% yoy.
Non-interest income grew strong, cost/income declined: Total other income grew
at a healthy rate of 30% yoy led by healthy core fees income. Core fee income
grew by 23% yoy primarily owing to strong traction in insurance business. Higher
growth in employee expense was driven by an increase in employee base and
higher gratuity related provision. Further, the cost-to-core income ratio declined
by 115bps/20bps on yoy/qoq basis to 38.8%. Management has guided 300bps
declined in C/I over the next 3-5 years.
Asset quality saw a marginal improvement: In absolute terms, GNPA went up by
Rs739cr, up 6.3% qoq and stood at 1.38% (1.40% qoq). PCR stood at 70%,
including floating provision PCR at 114% of GNPA. Slippages declined 14%/21%
yoy/qoq to `3,714cr (1.66% for Q2FY2020, 2.04% for Q1FY2020 and 2.3% for
Q2FY19). For HDB Financial Ser, management has adopted best practices viz. (a)
it has moved to daily recognition (b) tagging the related borrowers and facility to
same classification.
Deferred tax asset: During Q2FY2020, the bank has taken mark down of DTA
worth of `1,200cr, in line with new corporate taxation. Net benefit to the bank is
`450cr for 1HFY2020 (`1,650cr is the actual savings ex-DTA).
Outlook & Valuation: Credit growth beat the industry growth rate driven by strong
retail business. The strong liability franchise and healthy capitalisation provides
earnings visibility. We value HDFC Bank using SOTP method, valuing standalone
banking business at 3.7x of FY2021 ABV and its two subsidiaries at `78/share.
We recommend a Buy on the stock, with a target price of `1,390/ share.
Key Performance
Y/E March (` cr)
FY17
FY18
FY19
FY20E
FY21E
NII
33,139
40,092
48,243
57,126
68,121
% chg
20.1
21.0
20.3
18.4
19.2
Net profit
14,549
17,486
21,078
26,640
33,355
% chg
18.3
20.2
20.5
26.4
25.2
NIM (%)
4.5
4.4
4.4
4.4
4.3
EPS ( Rs)
28.4
33.8
38.7
48.7
61.0
P/E (x)
44.0
37.0
32.3
25.6
20.5
P/ABV (x)
7.5
6.1
4.7
4.2
3.6
RoA (%)
1.9
1.8
1.8
2.0
2.1
RoE (%)
18.3
18.2
16.8
17.2
18.7
Source: Company, Angel Research; Note: CMP as of Oct 22, 2019
BUY
CMP `1,241
Target Price `1,390
Investment Period 12 Months
Stock Info
Sector
Bloomberg Code
Shareholding Pattern (%)
Promoters 16.2
MF / Banks / Indian Fls 22.2
FII / NRIs / OCBs 47.1
Indian Public / Others 12.2
Abs. (%) 3m 1yr 3yr
Sensex 1.6 13.5 40.1
HDFC Bank 4.3 26.0 62.0
Nifty
11,604
Reuters Code
HDBK.BO
HDFCB IN
Face Value (`)
1
BSE Sensex
39,058
52 Week High / Low
1,285/942
Avg. Daily Volume
4,90,342
Beta
1.0
Banking
Market Cap (` cr)
6,77,636
3-Year Price Chart
Source: Company
Jaikishan Parmar
Research Analyst
022 – 39357600 Ext: 6810
Jaikishan.parmar@angelbroking.com
400
600
800
1000
1200
1400
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Oct-18
Jan-19
Apr-19
Jul-19
Oct-19
HDFC Bank
Stable Q2; Moderate NII Led by drop in NIM
Q2FY2020 Result Update | Banking
Oct 23, 2019
2
HDFC Bank| Q2FY2020 Result Update
Oct 23, 2019
2
Exhibit 1: Quarterly Performance
Particulars (` Cr)
Q1FY19
Q2FY19
Q3FY19
Q4FY19
Q1FY20
Q2FY20
% YoY
% QoQ
Interest earned
22,549
24,200
25,890
26,333
27,392
28,166
16.4
2.8
- on Advance s / Bills
17,391
18,828
20,306
21,019
21,805
22,514
19.6
3.3
- on investments
4,589
5,042
5,319
5,047
5,248
5,092
1.0
(3.0)
- on balance with RBI & other s
332
94
98
112
175
416
345.0
137.7
- on others
237
236
167
155
164
144
(38.9)
(12.0)
Interest Expended
11,735
12,436
13,314
13,244
14,097
14,651
17.8
3.9
Net Interest Income
10,814
11,763
12,577
13,089
13,294
13,515
14.9
1.7
Other income
3,818
4,016
4,921
4,871
4,970
5,589
39.2
12.5
- Fee & commission i ncome
3,171
3,296
3,647
3,692
3,552
4,055
23.0
14.2
- Treasury income
(283)
(33)
474
229
212
481
(1,565.5)
126.7
- Forex & derivative income
500
420
398
403
577
552
31.4
(4.3)
Others
431
333
403
547
630
502
50.8
(20.3)
C/I%
41
39.9
38.4
39.6
39.0
38.8
(115.5)bp
(20.3)bp
Operating income
14,632
15,779
17,498
17,961
18,264
19,104
21.1
4.6
Operating expenses
5,984
6,299
6,719
7,117
7,117
7,406
17.6
4.1
- Employee ex penses
1,811
1,909
1,968
2,074
2,217
2,355
23.4
6.2
- Other O pex
4,173
4,390
4,752
5,043
4,900
5,051
15.1
3.1
Pre-provision Pr ofit
8,648
9,480
10,779
10,844
11,147
11,698
23.4
4.9
Provisions & Contingencies
1,629
1,820
2,212
1,889
2,614
2,701
48.4
3.3
PBT
7,018
7,660
8,567
8,954
8,533
8,998
17.5
5.4
Provision for Tax
2,417
2,654
2,981
3,069
2,965
2,652
(0.1)
(10.6)
PAT
4,601
5,006
5,586
5,885
5,568
6,345
26.8
14.0
Effective Tax Rate (%)
34
35
35
34
35
29
(517.2)bp
(527.1)bp
Liability Profile
Advance
7,08,649
7,50,838
7,80,951
8,19,401
8,29,730
8,96,984
19.5
8.1
Yield A sst
10,35,821
11,15,400
11,17,423
11,91,337
12,12,401
12,77,609
14.5
5.4
Investment
2,75,679
3,00,086
2,79,753
2,90,588
2,98,503
3,07,148
2.4
2.9
Borrowing
1,21,024
1,42,719
1,23,460
1,17,085
1,00,894
92,236
(35.4)
(8.6)
Deposit
8,05,785
8,33,364
8,52,502
9,23,141
9,54,554
10,21,615
22.6
7.0
CA
1,09,297
1,15,131
1,11,905
1,42,498
1,25,663
1,36,791
18.8
8.9
SA
2,26,656
2,34,568
2,35,179
2,48,700
2,53,338
2,64,445
12.7
4.4
CASA
3,35,953
3,49,699
3,47,084
3,91,198
3,79,001
4,01,236
14.7
5.9
CASA%
41.7
42.0
40.7
42.4
39.7
39.3
(268.8)bp
(43)bp
CA%
13.6
13.8
13.1
15.4
13.2
13.4
(42.6)bp
22.5bp
SA%
28.1
28.1
27.6
26.9
26.5
25.9
(226.2)bp
(65.5)bp
NIM (Re ported)%
4.2
4.3
4.3
4.4
4.3
4.2
(10)bp
(10)bp
Source: Company
3
HDFC Bank| Q2FY2020 Result Update
Oct 23, 2019
3
Exhibit 2: Profitability
Particular (%)
Q 1FY19
Q 2FY19
Q 3FY19
Q 4FY19
Q 1FY20
Q 2FY20
% YoY
% QoQ
Advance Yield
10.18
10.32
10.61
10.51
10.58
10.43
11.1bp
(14.7)bp
Investment Yield
7.1
7.0
7.3
7.1
7.1
6.7
(28)bp
(40.1)bp
NIM
4.20
4.37
4.51
4.54
4.42
4.34
(3.2)bp
(8.2)bp
COF
5.11
5.23
5.46
5.25
5.38
5.40
17.5bp
2.2bp
Spread
5.1
5.1
5.1
5.3
5.2
5.0
(6.4)bp
(16.8)bp
RoA
1.7
1.8
1.9
1.95
1.79
2.03
24.7bp
23.3bp
RoE
17.2
16.4
15.9
16.1
14.6
16.3
(5.1)bp
168.9bp
Exhibit 3: As per internal business classification
Particular
Q1FY19
Q2FY19
Q3FY19
Q4FY19
Q1FY20
Q2FY20
% YoY
% QoQ
Auto
88,320
91,920
93,023
91,383
92,086
90,748
(1.3)
(1.5)
Two Wheelers
10,324
11,290
11,369
11,271
11,334
11,232
(0.5)
(0.9)
CV/CE
47,167
49,548
52,880
55,429
55,200
54,272
9.5
(1.7)
Sub-total - Auto Loans
1,45,811
1,52,758
1,57,272
1,58,083
1,58,620
1,56,252
2.3
(1.5)
Personal Loans
78,542
84,145
89,550
93,806
97,986
1,02,861
22.2
5.0
Home Loans
44,036
47,875
51,799
51,372
55,781
60,029
25.4
7.6
Business Banking
1,09,551
1,17,039
1,20,429
1,25,014
1,26,099
1,36,578
16.7
8.3
Kisan Gold Card
33,783
37,068
36,349
40,362
38,556
40,929
10.4
6.2
Credit Cards
38,792
40,535
44,839
46,630
49,523
52,043
28.4
5.1
Others
20,362
21,023
22,403
22,771
22,310
22,824
8.6
2.3
Gold Loans
5,529
5,701
5,760
5,838
5,924
6,086
6.8
2.7
Loans against securities
3,552
3,580
3,455
3,598
3,350
3,252
(9.2)
(2.9)
Total Retail Advances
4,79,958
5,09,724
5,31,856
5,47,474
5,58,149
5,80,854
14.0
4.1
Corporate & International
2,28,691
2,41,114
2,49,095
2,71,927
2,71,581
3,16,130
31.1
16.4
Total loans
7,08,649
7,50,838
7,80,951
8,19,401
8,29,730
8,96,984
19.5
8.1
Retail
68
68
68
67
67
65
(313.1)bp
(251.2)bp
Corporate
32
32
32
33
33
35
313.1bp
251.2bp
Exhibit 4: GNPA/NPA stable, Bank took contingent provision worth of `600Cr
Particular
Q1FY19
Q2FY19
Q3FY19
Q4FY19
Q1FY20
Q 2FY20
% YoY
% QoQ
GNPA
9,539
10,098
10,903
11,224
11,769
12,508
23.9
6.3
GNPA
2,907
3,028
3,302
3,215
3,567
3,791
25.2
6.3
GNPA%
1.3
1.33
1.38
1.36
1.40
1.38
5bp
(2)bp
NPA%
0.41
0.40
0.42
0.39
0.43
0.42
2bp
(1)bp
Slippage (%) Annl
2.0
2.3
2.0
1.75
2.04
1.66
(65.2)bp
(38.1)bp
Slippages
3,580
4,333
4,000
3,580
4,225
3,714
(14.3)
(12.1)
Credit Cost (%)
0.92
0.97
1.13
0.92
1.26
1.20
23.5bp
(5.6)bp
Provision Calc
69.52
69.92
69.57
71.32
69.29
69.57
(36)bp
28bp
4
HDFC Bank| Q2FY2020 Result Update
Oct 23, 2019
4
Outlook & Valuation: Credit growth beat the industry growth rate driven by strong
retail business. The strong liability franchise and healthy capitalisation provides
earnings visibility. We value HDFC Bank using SOTP method, valuing standalone
banking business at 3.7x of FY2021 ABV and its two subsidiaries at `78/share. We
recommend a Buy on the stock, with a target price of `1,390/ share.
Exhibit 5: Valuation Summary
Particulars
%
Valuati on
Methodology
Value/share
(`)
Value of HDFC Bank standalone
100
3.7x FY21E ABV
1326
Subsidiaries
HDB Fin
96%
3.5x FY21E ABV
67
HDFC Sec
98%
15x of FY21 PAT
11
Less: Cost of investments
(7)
Fair value per share
1390
Source: Company
Exhibit 6: One year forward P/BV (x)
Source: Company
2.75
3.53
3.86
2
2.5
3
3.5
4
4.5
Apr-09
Sep-09
Feb-10
Jul-10
Dec-10
May-11
Oct-11
Mar-12
Aug-12
Jan-13
Jun-13
Nov-13
Apr-14
Sep-14
Feb-15
Jul-15
Dec-15
May-16
Oct-16
Mar-17
Aug-17
Jan-18
Jun-18
Nov-18
Apr-19
Sep-19
P/BV
Avg. P/BV
+1STD
-1STD
5
HDFC Bank| Q2FY2020 Result Update
Oct 23, 2019
5
Income Statement (Standalone)
Y/E March (` cr)
FY17
FY18
FY19
FY20E
FY21E
Net Interest Income
33,139
40,092
48,243
57,126
68,121
- YoY Growth (%)
20.1
21.0
20.3
18.4
19.2
Other Income
12,296
15,221
17,626
21,100
23,814
- YoY Growth (%)
14.4
23.8
15.8
19.7
12.9
Operating Income
45,435
55,313
65,869
78,226
91,936
- YoY Growth (%)
18.5
21.7
19.1
18.8
17.5
Operating Ex penses
19,703
22,690
26,119
30,323
35,545
- YoY Growth (%)
16.0
15.2
15.1
16.1
17.2
Pre - Provision Profit
25,732
32,623
39,750
47,903
56,391
- YoY Growth (%)
20.4
26.8
21.8
20.5
17.7
Prov. & Cont.
3,593
5,927
7,550
10,692
11,817
- YoY Growth (%)
31.8
65.0
27.4
41.6
10.5
Profit Before Tax
22,139
26,696
32,200
37,211
44,574
- YoY Growth (%)
18.8
20.6
20.6
15.6
19.8
Prov. for Taxation
7,589
9,210
11,122
10,571
11,219
- as a % of PBT
34.3
34.5
34.5
28.4
25.2
PAT
14,549
17,486
21,078
26,640
33,355
- YoY Growth (%)
18.3
20.2
20.5
26.4
25.2
Balance sheet (Standalone)
Y/E March (` cr)
FY17
FY18
FY19E
FY20E
FY21E
Share Capital
513
518
545
547
547
Reserves & Surplus
85,652
1,05,776
1,43,882
1,69,943
1,96,897
Net Worth
86,164
1,06,294
1,44,427
1,70,490
1,97,444
Deposits
6,43,640
7,88,770
9,23,141
11,07,769
13,29,323
- Growth (%)
17.8
22.5
17.0
20.0
20.0
Borrowings
74,029
1,23,105
1,17,085
1,10,777
1,32,932
Other Liab & Prov.
56,709
45,764
55,108
66,466
79,759
Total Liabilities
8,60,542
10,63,933
12,39,761
14,55,502
17,39,459
Cash balances
37,897
1,04,670
46,764
60,927
73,113
Bank balances
11,055
18,244
34,584
17,724
21,269
Investments
2,14,463
2,42,200
2,90,588
3,65,564
4,38,677
Advances
5,54,568
6,58,333
8,19,401
9,83,281
11,79,938
- Growth (%)
19.4
18.7
24.5
20.0
20.0
Fixed Asset s
3,627
3,607
4,030
6,868
8,242
Other Assets
38,932
36,879
44,395
21,137
18,220
Total Assets
8,60,542
10,63,933
12,39,761
14,55,502
17,39,459
- Growth (%)
21.4
23.6
16.5
17.4
19.5
6
HDFC Bank| Q2FY2020 Result Update
Oct 23, 2019
6
Ratio analysis (Standalone)
Y/E March
FY17
FY18
FY19
FY20E
FY21E
Profitability Ratios (%)
NIMs
4.46
4.35
4.36
4.36
4.34
Cost to Income Ratio
43.4
41.0
39.7
38.8
38.7
RoA
1.9
1.8
1.8
2.0
2.1
RoE
18.3
18.2
16.8
16.9
18.1
B/S ratios (%)
CASA Ratio
48.0
43.5
42.4
45.0
45.0
Credit/Deposit Ratio
86.2
83.5
88.8
88.8
88.8
Asset Quality (%)
Gross NPAs
1.1
1.3
1.3
1.3
1.3
Net NPAs
0.3
0.4
0.4
0.4
0.4
Slippages
1.5
1.5
2.2
2.0
2.0
Loan Loss Prov./Avg. Assets
0.6
0.9
0.9
1.1
1.0
Provision Coverage
69
69
69
69
69
Per Share Data (`)
EPS
28.4
33.8
38.7
48.7
61.0
BVPS
168
205
265
312
361
ABVPS
167
204
263
309
358
DPS
5.5
6.5
7.5
8.5
10.0
Valuati on Ratios
PER (x)
43.9
36.9
32.2
25.6
20.4
P/BVPS (x)
7.41
6.07
4.70
4.00
3.45
P/ABVPS (x)
7.45
6.11
4.73
4.02
3.47
Dividend Yield
0.4
0.5
0.6
0.7
0.8
DuP ont Analysis (%)
FY17
FY18
FY19E
FY20E
FY21E
Interest Income
8.83
8.34
8.59
8.79
9.04
Interest Expenses
4.61
4.17
4.40
4.55
4.78
NII
4.22
4.17
4.19
4.24
4.26
Non Interest Income
1.57
1.58
1.53
1.57
1.49
Total Revenues
5.79
5.75
5.72
5.80
5.76
Operating Cost
2.51
2.36
2.27
2.25
2.23
PPP
3.28
3.39
3.45
3.55
3.53
Total Provisions
0.46
0.62
0.66
0.79
0.74
PreTax Profit
2.82
2.77
2.80
2.76
2.79
Tax
0.97
0.96
0.97
0.78
0.70
ROA
1.85
1.82
1.83
1.98
2.09
Leverage
9.88
10.00
9.19
8.56
8.68
RoE (%)
18.32
18.17
16.81
16.92
18.13
Valuation done on closing price of 22/10/2019
7
HDFC Bank| Q2FY2020 Result Update
Oct 23, 2019
7
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
Research Team Tel: 022 - 39357800 E-mail: research@angelbroking.com Website: www.angelbroking.com
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited, Bombay
Stock Exchange Limited, Metropolitan Stock Exchange Limited, Multi Commodity Exchange of India Ltd and National Commodity &
Derivatives Exchange Ltd It is also registered as a Depository Participant with CDSL and Portfolio Manager and Inves tment Adviser with
SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered entity with SEBI for Research
Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164. Angel or its associates has not
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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decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
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companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
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Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding posi tions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
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