HDFC Bank- we understand your world

HDFC Bank results:-

🏦Profits grow at 18.2%
🏦Asset quality remains stable with credit costs at 1.65% for the quarter
🏦CAR at 18.8%
🏦Gross NPAs at 1.32% vs 1.38%
🏦HDB Financial returns to profits

Overall stable nos....commentary will be important!#Q4withJST #BankingwithJST pic.twitter.com/EJPNUQlbeu

— JST Investments (@JstInvestments) April 17, 2021
3 Likes

I am not sure where do you see the reduction in Interest income (I have attached recent Standalone Income statement).
Also, we need to see this income in light of falling interest rate (please see the reduction in Interest expanded). Given that overall Interest rates are going down, maintaining 4.2% Net interest margins is not bad.

3 Likes

Since, we don’t agree with screener’s perspective on these numbers, let’s look at them ourselves.

Snap of Consolidated numbers:

Point 1:

Entry 1a, “Interest on Bills” which is the core biz, where we should track the growth is up by 3.25%

That is low. But, it’s good to be conservative in these times.

Point 2: Total income, Entry 3, is up 6%

Point 3: But Operating profit, Entry 7, up 18.8% which is all over the news/media.

I leave this to individual interpretation.

They have decided to NOT give dividend this year. That’s a first in a long time.

I feel, good lenders will curtail all ambition for growth as long as covid is around. Think only about survival.

For Unsecured lenders this is a perfect storm.

4 Likes

That second row is interest expense.

HDFC Bank Q4FY21 - Above Expectations

Positives

  • Growth: +16% yoy rev (+13% NII, +25% non-interest income) / +20% yoy PPOP / +14% yoy loans (+21% corporate, +7% retail)
  • Asset quality: at pre-COVID levels … GNPL at 11.3%, NNPL at 0.4%, restructured loans at 0.6%

Reserve Bank of India - Notifications.

  1. In view of the ongoing stress and heightened uncertainty on account of COVID-19, it is imperative that banks continue to conserve capital to support the economy and absorb losses. In order to further strengthen the banks’ balance sheets, while at the same time support lending to the real economy, it has been decided that banks shall not make any dividend payment on equity shares from the profits pertaining to the financial year ended March 31, 2020

Does the bank hold a separate call for foreign investors? Was surprised at Saturday’s call - hardly 20 minutes of Q & A session. And the timing too seemed eminently unsuitable for FIIs - it would have been Saturday 7:30 AM at that time in New York. Surprising for India’s leading bank and one that is listed on NYSE and 40% foreign owned.

3 Likes

This is how I understand the results (standalone only - consolidation will make a marginal difference) -

  • % of Gross NPAs to Gross Advances (1.32%, which was 1.26% in FY20) and % of Net NPAs to Net Advances (0.40%,which was 0.36% in FY20) looks Ok
  • Breakup of Income in FY21 looks Ok when compared to last FY
  • In FY21, Treasury segment BOOSTED the Net Profit immensely whereas Retail dragged the overall results (only 25% contribution to profits whereas revenue from this segment is 50%). Need to see how it pans out for other banks in coming days.

Standalone numbers as below:

Key Notes:
Note-6 Excerpt: … Given that the current “second wave” has significantly increased the number of COVID-19 cases in India and uncertainty remains, the Board of Directors of the Bank, at its meeting held on April 17, 2021, has considered it prudent to currently not propose dividend for the financial year ended March 31, 2021. The Board shall reassess the position based on any further guidelines from the RBI in this regard.
Note-11 Excerpt: … If the Bank had classified borrower accounts as NPA after August 31, 2020, the Bank’s proforma Gross NPA ratio and proforma Net NPA ratio at December 31, 2020 would have been 1.38% and 0.40% respectively. Pending disposal of the case, the Bank, as a matter of prudence, had made in respect of these accounts a contingent provision, which was included in ‘Provisions (other than tax) and Contingencies’.

Disc: Invested and have done transaction in last 4 weeks

5 Likes

Invested.

Here are the latest numbers (including FY21 financials).

Year EPS EPS increase Book value per share Book value increase Price (low) Price Price (high) P/B (low) P/B P/B (high) P/E (low) P/E P/E (high)
FY1996 0.10 1.11 3.24 2.92
FY1997 0.20 95.19% 1.22 9.91% 4.52 3.70
FY1998 0.32 55.67% 1.43 17.21% 7.08 4.95
FY1999 0.41 30.38% 1.69 18.18% 6.92 4.09
FY2000 0.59 43.93% 3.09 82.84% 25.72 8.32
FY2001 0.86 45.70% 3.75 21.36% 22.84 6.09
FY2002 1.10 27.43% 6.90 84.00% 23.66 3.43
FY2003 1.38 24.89% 7.96 15.36% 23.46 2.95
FY2004 1.80 30.55% 9.45 18.74% 23.10 37.88 40.65 2.44 4.01 4.30 12.87 21.10 22.65
FY2005 2.29 27.69% 14.59 54.32% 25.60 57.36 62.85 1.76 3.93 4.31 11.17 25.03 27.42
FY2006 2.79 21.82% 16.92 16.03% 44.80 77.43 81.20 2.65 4.58 4.80 16.05 27.73 29.08
FY2007 3.63 29.98% 20.14 19.01% 61.50 95.42 116.00 3.05 4.74 5.76 16.95 26.29 31.96
FY2008 4.62 27.36% 32.44 61.05% 89.50 133.13 182.50 2.76 4.10 5.63 19.36 28.80 39.49
FY2009 5.29 14.34% 34.43 6.14% 77.40 97.34 160.00 2.25 2.83 4.65 14.65 18.42 30.27
FY2010 6.76 27.83% 47.22 37.15% 99.25 193.35 199 2.10 4.09 4.21 14.69 28.62 29.46
FY2011 8.50 25.84% 54.99 16.45% 178.5 234.59 254 3.25 4.27 4.62 21.00 27.59 29.88
FY2012 11.06 30.03% 64.37 17.05% 200.1 259.93 269.95 3.11 4.04 4.19 18.10 23.51 24.42
FY2013 14.25 28.86% 77.00 19.62% 241.1 312.68 352.75 3.13 4.06 4.58 16.93 21.95 24.76
FY2014 17.74 24.50% 92.05 19.55% 264 374.4 380.35 2.87 4.07 4.13 14.89 21.11 21.45
FY2015 21.08 18.83% 125.98 36.86% 353.65 511.35 554.65 2.81 4.06 4.40 16.78 24.26 26.32
FY2016 24.42 15.87% 146.95 16.65% 464 535.58 564 3.16 3.64 3.84 19.00 21.93 23.10
FY2017 28.59 17.08% 179.11 21.88% 521.4 721.28 739.95 2.91 4.03 4.13 18.24 25.23 25.88
FY2018 33.88 18.50% 211.17 17.90% 712.5 943.05 1007.5 3.37 4.47 4.77 21.03 27.84 29.74
FY2019 39.33 16.07% 282.14 33.61% 930.15 1159.45 1166 3.30 4.11 4.13 23.65 29.48 29.65
FY2020 49.70 26.38% 321.63 14.00% 738.75 861.9 1305.5 2.30 2.68 4.06 14.86 17.34 26.27
FY2021 57.74 16.18% 380.62 18.34% 826.1 1494.4 1641 2.17 3.93 4.31 14.31 25.88 28.42

At current price of 1440, trailing P/B ~ 3.79 and P/E ~ 24.94.

Disclosure: Invested (position size here)

15 Likes

While Marcellus are known for marketing their holding, this is good article from Saurabh M.

Discl - invested in HDFC Bank and Kotak Bank.

2 Likes

RBI imposes a 10 cr. fine (largest ever fine) for irregularities in HDFC bank’s auto loan division. HDFC bank had previously investigated this issue and found misconduct from some employees, 6 of whom were subsequently fired.

Disclosure: Invested (position size here)

7 Likes

Hi

Came across this article on BQ

I was aware from linkedin that they are setting up a separate team for all the tech troubles they have landed themselves into and a future roadmap. If I look at it positively the intent and effort is in the right direction, from a negative lens I hope this is not too late.

Aside the rumoured partnership with the Turakhia brothers is something I will watch very closely. They have been one of the best entrepreneurs of the country in my books.

Rgds
Deepak

Disc: continue to be invested

12 Likes

Interesting article on long term planning of HDFC Bank to address recurring IT problem

1 Like

A dividend of Rs. 6.50 per equity share of face value of Re.1/- each (i.e. 650% on face value) out of the net profits for the year ended March 31, 2021, has been recommended.

The record date has been fixed as June 30, 2021.

2 Likes

discl - invested.

Why is the bank buying the Insurance company? What is the synergy here and that too buying just 5% stake?

Invested

1 Like

Most probable reason seems to be upcoming IPO of HDFC Ergo

02 intrsting updates from the bank.

  1. Shouldn’t the CIO be fired by now. What these guys are waiting for. Though a welcome move, even if its quite late.
  1. Getting stakes like this, also shows banks futuristic management.

Disc : Invested.

2 Likes

HDFC Bank- FY21 Annual Report Update by Nirmal Bang- A covid-proof year blemished by tech glitches

1 Like