Result Analysis: HDFC Bank – Q2FY21

Result Analysis:  HDFC Bank – Q2FY21

CMP: 1224 (As on 20-10-2020)

Total Income at 38,438 Cr 

36,130 Cr (6.38%) YoY | 36,699 Cr (4.73%) QoQ 

Six month ended 75,137 Cr Vs. 70,455 Cr (6.64%) 

Net Profit of 7,702 Cr 

6,638 Cr (16.04%) YoY | 6,927 Crs (11.14%) QoQ 

Six month ended: 14,630 Cr Vs. 12,314 Cr (18.83%) 

EPS (in Rs) 14.0 

12.0 YoY | 12.6 QoQ 

Six months ended EPS: 26.5 Vs. 22.4 

Gross NPA 11,305 Cr 

12,508 Cr YoY | 13,773 Cr QoQ 

Net NPA at 1,756 Cr 

3,791 Cr YoY 3,280 Cr QoQ 

GNPA(%) 1.08 vs 1.38 YoY 1.36 QoQ 

NNPA(%) 0.17 vs 0.42 YoY 0.33 QoQ 

Return on asset (%) 0.48 Vs 0.50 YoY 0.44 QoQ 

View: Result is overall good. YoY total income increased and profit also up. In every quarter bank has posted strong performance. Gross NPA and Net NPA both decreased in this quarter. 

Business Updates & Highlights

Net interest income (interest earned less interest expended) for the quarter ended Sep 30, 2020 grew by 16.7% to INR 15,776 crore from INR 13,515 crore for the quarter ended Sep 30, 2019, driven by asset growth of 21.5%, and core net interest margin for the quarter of 4.1%. 

Other income (non-interest revenue) at INR 6,092.5 crore was 27.9% of the net revenues for the quarter ended Sep 30, 2020 as against INR 5,588.7 crore in the corresponding quarter ended Sep 30, 2019. ‘Fees & commissions’, which goes into other income of stood at INR 3,940 crore compared to INR 4,740 crore in the corresponding quarter of the previous year therefore declined by 20.2%. 

Provisions and contingencies for the quarter ended Sep 30, 2020 were INR 3,703.5 crore (consisting of specific loan loss provisions of INR 1,240 crore and general provisions and other provisions of INR 2,041.7 crore) as against INR 2,700.7 crore (consisting of specific loan loss provisions of INR 2,041 crore and general provisions and other provisions of INR 659.3 crore) for the quarter ended Sep 30, 2019. Total provisions for the current quarter included contingent provisions of approximately INR 2,300 crore. 

Total balance sheet size as of Sep 30, 2020 was INR 1,609,428 crore as against INR 1,325,072 crore as of Sep 30, 2019, a growth of 21.5%. 

Total deposits as of Sep 30, 2020 were INR 1,229,310 Cr Vs. 1,021,870 Cr in Sep 2019 Vs. 1,189,387 crore in June 2020, an increase of 20.3% in YoY and 3.3% in QoQ. CASA deposits comprising 41.6% of total deposits as of Sep 30, 2020. 

Total advances as of Sep 30, 2020 were INR 1,038,335 Cr Vs. 896,662 Cr in Sep 2019 Vs. 1,003,299 crore in June 2020, an increase of 15.4% in YoY and 3.5% in QoQ. Domestic advances grew by 15.4% over Sep 30, 2019. 

The Bank’s total Capital Adequacy Ratio (CAR) as per Basel III guidelines was at 19.1% as on Sep 30, 2020 (17.5% as on Sep 30, 2019) 

According to disclosures made by HDFC Bank, outstanding retail loans rose 5.43% year-on-year to Rs 4.85 lakh crore as on Sept. 30. Sequentially, that’s a rise of 2.1%. 

Top 5 loans 

Sep 2020 June 2020 Change

Personal loans: 112,446 Cr 111,567 Cr 0.78%

Auto loans: 79,664 Cr 81,082 Cr (1.75%)

Business Banking: 63,511 Cr 60,596 Cr (4.8%)

Home loans: 62,847 Cr 60,596 Cr 0.3%

Credit Card: 58,142 Cr 54,698 Cr 6.3%

Bank has two subsidiaries: HDFC Securities Limited (HSL) is amongst the leading retail broking firms in India. As on Sep 30, 2020, the Bank held 96.5% stake in HSL. Q2FY21 HSL Total income was INR 341.4 Cr Vs. 189.3 Cr in Sep 30, 2019. Q2FY21 PAT was INR 167.1 Cr Vs. 91 Cr in Q2FY20

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 Sep 30, 2020, the Bank held 95.3% stake in HDBFSL. 

The consolidated net interest income for the quarter ended Sep 30, 2020 was INR 924.2 crore Vs. 971.1 in Sep 2019 therefore declined by 4.8% in YoY. 

Q2FY21 Net profit was INR 29.9 Cr Vs. 213 Cr in Q2FY20 therefore significantly declined by 85.9% in YoY. Loan book as of Sep 2020 was INR 57,014 Cr Vs. 55,759 Cr in Sep 2019 therefore up by 2.3%.

Gross NPA in Sep 2020 was 4.3% of gross advances and Net NPA was 3.1% of net advances. 

Financial

ROE and ROCE is around 16.5% and 7.3% respectively. Book value per share is around INR 320 and share is currently trading at 3.9x 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% in the bank, FIIs and mutual fund hold around 37% and 14% respectively. **Special mention accounts and overdue accounts where moratorium or deferment were announced stood at Rs 15,744 crore**Amount where asset classification benefit has been extended stood at Rs 4,639.5 crore. Provisions against accounts taking benefit under Covid-19 moratorium scheme at Rs 620 crore

Share View: Share price high 1,304 (52 week) and now 1,199. 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. Long term investor should continue with the company and any correction with good opportunity. Long term target can be 1400. 

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 41.6% of total deposits. Despite Covid – 19 outbreak HDFC has increased NII and also bottom line improved in YoY. After Yes bank Fiasco retail banking / customer are also looking for big bank like HDFC and bank is continuously increasing their presence and strong retailers banking and deposits also. Very strong brand and network: As of Sep 30, 2020, the Bank’s distribution network was at 5,430 branches Vs. 5,326 branches in June 2020, 15,292 ATMs in Sep 2020 Vs 14,996 ATMs in June 2010. Cash Deposit & Withdrawal Machines (CDMs) across 2,848 Cities Vs 2,825 cities / towns in June 2020. Number of employees were at 117,082 in Sep 2010 Vs 115,822 as of June 30, 2020. 

Risk : Fee & commission income which were part of other income still down by 20% in YoY. Special mention accounts and overdue accounts where moratorium or deferment were announced stood at Rs 15,744 crore. HDB financial (material subsidiary of bank) business net interest down by 4.8% in YoY and profit significantly down by more than 85.9% in this quarter as compare with YoY. 

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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