MOSL: HDFC Bank (Buy) - Well placed to capture emerging opportunities - Takeaways from the Annual Analyst Meet

HDFC Bank: Well placed to capture emerging opportunities; Takeaways from the Annual Analyst Meet

(HDFCB IN, Mkt Cap USD79.7b, CMP INR1979, TP INR2400, 21% Upside, Buy)

We attended HDFC Bank’s (HDFCB) annual analyst meet, wherein it showcased the breadth of its top management and discussed the progress that different businesses are making. Management, thus, highlighted the growth potential of different businesses and further discussed succession planning, digital initiatives, competitive positioning, subsidiary performance and the journey ahead. This note captures the detailed takeaways from the meet, as well as our thoughts on the bank.

 Key takeaways from session with Mr Aditya Puri – MD & CEO

• Macro: According to HDFCB, the INR would not depreciate much from here, fiscal deficit would remain in control and GDP growth is healthy at 7.3-7.5%. Capacity utilization levels have increased to ~76%, and the investment cycle generally picks up around 80% utilization levels. There is no systemic risk in the Indian banking system. Financialization of the economy will keep increasing and a lot of the wealth under the system is getting more formal. This is generating more opportunities for the banking system.
• HDFCB expects demand to exceed supply in the next five years. The bank continues to see strong growth opportunities as the credit market still remains largely underpenetrated. However, the bank will not chase growth at the expense of margins/risks.
• The bank plans to launch online loan against mutual funds – money will get disbursed electronically without any manual intervention.
• The bank has substantial management depth up to three levels down, and thus, there are no concerns about management bandwidth and succession at any level in the organization.