Peak pessimism about a fundamentally strong company typically augurs well for a stock. As every one can’t get rich at the same time (reason why stocks with strong consensus buys seldom generate superior returns), same goes the other way. Infy at 1300 last year had seen similarly record bearish bets and stock has since then risen 30% even with slowness in IT sector recovery.
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Must watch for all those interested in HDFC Bank. Something for everyone…the naysayers, and the yeasayers! !
From the Goldman Sachs event earlier today…
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Making a fundamental analysis of HDFC Bank as of now from historical data does not make sense as it has gone through a huge ownership restructuring process as hdfc bank merged hdfc with itself becoming the single entity.
The biggest advantage HDFC Bank earlier had was its tech but not anymore, almost every other competitor today is equipped with similar tech.
ICICI Bank has shown far better growth in terms of new customer acquisition in the last 2-3 years.
Hdfc banks face the biggest challenge in retail as follows:
Moving to tier 2 tier 3 cities and rural areas to acquire customers would harm the bank more as they have a high Min balance requirements and high service charges (as people are accustomed to nationalised banks in these areas)
They have a huge fleet of ATMs and it is more than worrisome to maintain these as people have quickly shifted towards UPIs and maintenance cost could eat out huge portions of profits (5-10 years back it used to be the core edge they had)
HDFC Bank used to be the front runner in the credit card segment but currently the space has become too crowded with competition making it very hard to have a good profit margins.
But at current valuations, it is very hard to resist this keeping in mind the time it might take to unfold the merger benefits which could be 5-8 Qtrs from here.
It has a huge huge customer base to which it could cross sell its other financial services and products and this merger has added another big already established customer base.
The short term view could be near the election from now on till July end nearing results declaration of Q1.
Long term perspective is for almost 4-5 years making it a little sluggish but rather a safe bet in the fundamentally strong player.
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A slightly old article I came across:-
My recent experience with the bank reinforces the same.
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The Reserve Bank of India is considering a $5 billion sell-buy swap operation to mature on Monday, which could inject over Rs 40,000 crore into the banking system. This move aims to support liquidity amidst year-end tax outflows and manage the recent deficit in liquidity due to banks’ borrowings from the central bank.
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Hdfc demerger again, 6 months back they said it was a good call,
Any link of this news?
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This is not a demerger. This is listing of a subsidiary, for which majority will still be with HDFC Bank. Previously HDFC bank was the subsidiary and HDFC Limited was holding company. Now the structure will be similar to all other banks - like ICICI bank, Kotak etc where parent is a bank and will have listed subsidiaries with varying stake levels
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- Gross Advances: The bank’s gross advances totaled approximately ₹25,080 billion as of March 31, 2024, showing a growth of about 55.4% over the previous year and 1.6% over December 31, 2023. Domestic retail loans saw significant growth of around 108.9%, while commercial & rural banking loans and corporate & other wholesale loans also increased, albeit at lower rates.
- Deposits: The bank’s deposits amounted to roughly ₹23,800 billion as of March 31, 2024, exhibiting a growth of about 26.4% over the previous year and 7.5% over December 31, 2023. Both retail and wholesale deposits increased, with retail deposits growing by around 27.8% and wholesale deposits by about 19.4% over March 31, 2023.
- CASA Deposits: CASA deposits reached approximately ₹9,090 billion as of March 31, 2024, showing a growth of about 8.7% over the previous year and 8.8% over December 31, 2023. The bank’s CASA ratio decreased slightly to around 38.2% compared to the previous year. https://www.bseindia.com/xml-data/corpfiling/AttachLive/fa62e3ee-b207-4078-b16a-be97b3f4300d.pdf
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I guess we have to wait for the NIMS to see the profitability part
NIM will be low (as per previous quarter) due to higher statutory deposit requirements due to merger. but will improve in few quarters
Concentrate on advance growth and deposit growth with NPA
Then only the bank can grow faster than GDP plus inflation
Hopefully more market share from public sector banks and HDFC customers now they are merged
NIM will catch up in the mid to long term
Disc- invested
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How many shares of HDB financial shares will be credited to hdfc bank share holders?
HDFC owns nearly 95% of HBD financial services profit was about 6.4 billion rupees (640 crores) planning to sell 20% of the stake roughly at a valuation of 10 billion dollars which is about 85,000 crores
so the 20% of the company will be about 2 billion dollar’s 16500 crores will be converted from equity to cash in HDFC bank balance sheet
so as share holders our companies investment in HBD is getting converted to cash for us nothing more
no equity shares for us our company will own about 75 % of the company provided there are no more disinvestments
invested comments are welcome
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