HDFC Bank – Result Analysis Q1 FY20-21
CMP: 1,136 (As on 20-07-2020 at 12:45 PM)
Total Income at 36,699 Cr
34,324 Cr (6.93%) YoY | 38,287 Cr (-4.11%) QoQ
Year ended 147,068 Cr Vs. 124,107 Cr (18.51%)
Net Profit of 6,927 Cr
5,676 Cr (22.04%) YoY | 7,280 Crs (-4.84%) QoQ
Year ended 27,254 Cr Vs. 22,332 Cr (22.03%)
EPS (in Rs) 12.6
10.3 YoY | 13.2 QoQ
12 months ended EPS: 49.5 Vs. 41.3
Gross NPA 13,773 Cr
11,769 Cr YoY | 12,650 Cr QoQ
Net NPA at 3,280 Cr
3,568 Cr YoY 3,542 Cr QoQ
GNPA(%) 1.36 vs 1.40 YoY 1.26 QoQ
NNPA(%) 0.33 vs 0.43 YoY 0.36 QoQ
Return on asset (%) 0.44 Vs 0.46 YoY 0.49 QoQ
View:
Result is above expectation and strong result. YoY total income
increased and profit also up. However QoQ total income and profit both
have decreased due to other Income impact, other income recorded around
INR 4,075 Cr Vs. 6,033 Cr in QoQ. HDFC Bank set aside provisions and
contingencies worth INR 3891.5 crore during the first quarter of this
fiscal.
Business Updates & Highlights:
The bank did not
disclose the proportion of loans under moratorium. The Reserve Bank of
India has permitted banks to offer a six-month moratorium on loan
repayments.
Net interest income (interest earned less interest
expended) for the quarter ended June 30, 2020 grew by 17.8% to INR
15,665.4 crore from INR 13,294.3 crore for the quarter ended June 30,
2019, driven by growth in advances of 20.9%, and a growth in deposits of
24.6%. The net interest margin for the quarter was at 4.3%.
Other
income (non-interest revenue) at INR 4,075.3 crore was 20.6% of the net
revenues for the quarter ended June 30, 2020 as against INR 4,970.3
crore in the corresponding quarter ended June 30, 2019. ‘Fees &
commissions’, which goes into other income of stood at INR 2,230.7 crore
compared to INR 3,551.6 crore in the corresponding quarter of the
previous year therefore declined by 37.2%.
Provisions and
contingencies for the quarter ended June 30, 2020 were INR 3,891.5 crore
(consisting of specific loan loss provisions of INR 2,739.8 crore and
general provisions and other provisions of INR 1,151.7 crore) as against
INR 2,613.7 crore (consisting of specific loan loss provisions of INR
2,248.0 crore and general provisions and other provisions of INR 365.7
crore) for the quarter ended June 30, 2019. Total provisions for the
current quarter included contingent provisions of approximately INR
1,000 crore.
Total balance sheet size as of June 30, 2020 was INR
1,545,103 crore as against INR 1,265,253 crore as of June 30, 2019, a
growth of 22.1%.
Total deposits as of June 30, 2020 were INR
1,189,387 crore, an increase of 24.6% over June 30, 2019. CASA deposits
comprising 40.1% of total deposits as of June 30, 2020.
Total
advances as of June 30, 2020 were INR 1,003,299 crore, an increase of
20.9% over June 30, 2019. Domestic advances grew by 21.0% over June 30,
2019. While total retail advances rose 7.2% to Rs 4.75 lakh crore as of
June 30 over the last one year, loans in the auto, two-wheeler,
commercial vehicles and commercial equipment categories declines. Loans
against securities also contracted. Retail loans comprise 48% of the
banks’ total lending book
The Bank’s total Capital Adequacy Ratio
(CAR) as per Basel III guidelines was at 18.9% as on June 30, 2020
(16.9% as on June 30, 2019)
Bank has two subsidiaries: HDFC
Securities Limited (HSL) is among the leading retail broking firms in
India. As on June 30, 2020, the Bank held 96.5% stake in HSL.
HDB
Financial Services Limited (HDBFSL) is a non-deposit taking non-banking
finance company (‘NBFC’) offering wide range of loans and asset finance
products to individuals, emerging businesses and micro enterprises. As
on June 30, 2020, the Bank held 95.3% stake in HDBFSL. The consolidated
net profit for the quarter ended June 30, 2020 was INR 6,927 crore, up
22.0%, over the quarter ended June 30, 2019. Consolidated advances grew
by 19.6% from INR 880,939 crore as on June 30, 2019 to INR 1,053,683
crore as on June 30, 2020
Financial
ROE and ROCE is around 17% and 7.3% respectively and book value per share is around INR 325 and share
is currently trading at 3.4x of its book value. Bank is currently
trading at annualized PE of around 23 which is average as per industry
benchmark. Promoter hold around 26.1% in the bank, FIIs and mutual fund
hold around 37% and 14% respectively. The Bank held floating provisions
of Rs 1,451 crore and contingent provisions of Rs 4,002 crore as on June
30, 2020
Share View: Share price high 1,304 (52 week) and
now 1,100. HDFC Bank Limited is a publicly held banking company engaged
in providing a range of banking and financial services including retail
banking, wholesale banking and treasury operations
Strong support
at INR 1,050/950. Long term investor should continue with the company
and any correction with good opportunity to add on SIP basis.
Opportunities:
Strong Balance sheet and continuously showing strength in YoY and QoQ
especially for deposit, advances all grew in YoY and QoQ. CASA deposit
ratio is also improved around 40.1% of total deposits. Despite Covid –
19 outbreak HDFC has increased NII and also bottom line improved in YoY.
Further after Yes bank Fiasco retail banking / customer are also
looking for big bank like HDFC. Strong brand network: As of June 30,
2020, the Bank’s distribution network was at 5,326 branches and 14,996
ATMs / Cash Deposit & Withdrawal Machines (CDMs) across 2,825 cities
/ towns as against 4,990 branches and 13,727 ATMs / CDMs across 2,764
cities / towns as of June 30, 2019. Number of employees were at 115,822
as of June 30, 2020 (as against 104,154 as of June 30, 2019).
Risk:
QoQ result is down NII and profit declined due to other income impact.
Other income down in YoY and QoQ. The main components of other income
Fee & Commission declined by more than 37% in this quarter. The
continued slowdown in economic activity has led to a decrease in loan
originations, the sale of third party products, the use of credit and
debit cards by customers, the efficiency in collection efforts and
waiver of certain fees. The continued slowdown may lead to a rise in the
number of customer defaults and consequently an increase in provisions
there against.
Analysis:
One of the best among the Indian banking Industry. This bank was not
even in the TOP 15 companies a decade back and today is No#1 as per the
free-float Market Cap. Very high growth, best margin and least NPA.
Consistently giving good results for the last 2 decades. Far further
than 2nd Biggest bank Icici Bank. India has transformed from a 0.5
trillion to 2.8 Trillion economy and the major Bank has cashed this
Boom. HDFC Bank was having revenue and profits of around 1500 cr and 200
cr during the year 2000. We may see HDFC Bank enter the elite club
companies of India with Profit of more than 1 lakh cr till 2030, 1st
Indian bank to see this profit. Today HDFC bank generates around 1.5
lakh cr revenue. Better managing sales along with professionally managed
Gross NPA (around 1.3%) has helped HDFC bank cross 25000 cr
profit-making club where just 3-5 Indian Companies are there. Investment
of 1 Lakh done 2 decades back is today 2.75 crore along with consistent
dividends. All those holding for a long time, no need to worry as
Economy if moving from 3 tr to 5 tr till 2025, majority of the banks
with good management will be again able to cash the boom.
This is a must have stock in portfolio. It can be purchased around 1025 to 1045 levels with a target of Rs 1400 in near future.
Sources:
Various publications
Disclaimer: The
information provided herein is based on publicly available information and
other sources believed to be reliable, but involve uncertainties that could
cause actual events to differ materially from those expressed or implied in
such statements. The document is given for general and information purpose and
is neither an investment advice nor an offer to sell nor a solicitation. While
due care has been exercised while preparing this document, we do not warrant
the completeness or accuracy of the information. We will not accept any
liability arising from the use of this material. The recipient of this material
should rely on their investigations and take their own professional advice.
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