MOSL: HDFC BANK (Buy)-Stellar performance on all fronts
​HDFC Bank: Stellar performance on all fronts
(HDFCB IN, Mkt Cap USD59.4b, CMP INR1497, TP INR1790, 20% Upside, Buy)
HDFC Bank's (HDFCB) 4QFY17 PAT grew 18% YoY (2% beat) to INR39.9b, led by 27% YoY PPoP growth (10% beat). The bank delivered robust loan growth, strong cost control, margins improvement and impeccable asset quality.
Loans grew 12% QoQ and 19% YoY to INR5.55t. Note that sequential growth is off a low base due to run-down of FCNR (B) linked loan book in the prior quarter. Domestic loans grew 23.7% YoY in FY17. Incremental growth in the quarter was driven by corporate loans (62% incremental share; 36% of overall loans). In retail loans (+9% QoQ and 22% YoY), the main drivers were credit cards and business banking (+10%/13% QoQ and 27%/43% YoY). For FY17, HDFCB achieved 25% incremental market share of the system.
The bank is focusing cutting flab in the system. Further, digitalization is helping reduce the excess workforce. Headcount declined by ~6k (10k in 2H) QoQ, leading to 8% QoQ decline in employee costs.
Other highlights: a) Asset quality is impeccable, with NSL less than 50bp. However, HDFCB incurred increased provisioning due NPAs that received RBI dispensation in the prior quarter; b) fees grew 16% YoY and 14% QoQ.
HDFC Bank is a commercial banking group based in India. Co. is engaged in providing banking and financial services. Co.'s operations are organized along four segments: Treasury, which includes its investment operations; Retail Banking, which serves retail customers with deposit products, loans and other services through a branch network and other delivery channels; Wholesale Banking, which provides loans, non-fund facilities and transaction services to corporations, public sector units, government bodies, and medium scale enterprises; and Other Banking Business, which includes para banking activities such as credit cards and debit cards.
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