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HDFC Bank: Growth Stumbles Post Demonetisation - Views on News from Equitymaster
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HDFC Bank: Growth Stumbles Post Demonetisation
Jan 30, 2017

HDFC Bank declared the results for the third quarter of financial year ending March 2017 (3QFY17). The bank has reported 18% YoY and 15% YoY growth in net interest income and net profits respectively in 3QFY17. Here is our analysis of the results.

Performance summary
  • Net interest income grows 17.6% YoY in 3QFY17 on the back of 13.4% YoY growth in advances.
  • NIMs witnessed a slight decline and came in at 4.1%.
  • Cost to income ratio remained the same at 42.3%.
  • Net NPA to advances were flat at 0.3% in 3QFY17, while the gross NPAs remained flat at 1.05% of advances.
  • Capital adequacy ratio (CAR) comfortable at 15.9%, Tier I CAR at 13.8% at the end of December 2016.

    Financial Snapshot
    Rs (m) 3QFY16 3QFY17 Change 9MFY16 9MFY17 Change
    Interest income 154,111 176,056 14.2% 442,247 511,916 15.8%
    Interest expense 83,426 92,965 11.4% 240,865 271,074 12.5%
    Net Interest Income 70,685 83,091 17.6% 201,382 240,841 19.6%
    Net interest margin (%) 4.3% 4.1%
    Other Income 28,722 31,427 9.4% 78,859 88,502 12.2%
    Other Expense 42,048 48,425 15.2% 123,954 144,814 16.8%
    Provisions and contingencies 6,539 7,158 9.5% 20,632 23,315 13.0%
    Profit before tax 57,359 66,093 15.2% 156,286 184,530 18.1%
    Tax 17,251 20,281 17.6% 46,435 55,619 19.8%
    Profit after tax/ (loss) 33,568 38,653 15.1% 89,220 105,596 18.4%
    Net profit margin (%) 21.8% 22.0% 20.2% 20.6%
    No. of shares (m)* 2555.4
    Book value per share (Rs) 332.7
    P/BV (x)* 3.9

    *Book value as on 31st December 2016

  • HDFC Bank reported a slight slowdown in its overall numbers amid demonetisation. The retail advances grew at 17.8% in 3QFY17. Within the retail loan segment, the fastest growing segments were Home loans and Personal Loans.
  • Deposit growth for HDFC Bank at 21.1% YoY remained robust while the overall balance sheet grew by 18.3% YoY. CASA (low cost deposits) as a share of total deposits saw a steep increase due to demonetisation and had a share of 45.4% in 3QFY17.

    CASA deposits get a boost from demonetisation
    (Rs m) 3QFY16 % of total 3QFY17 % of total Change
    Advances 4,363,644 4,950,433 13.4%
    Retail 2,311,323 53.0% 2,722,738 55.0% 17.8%
    Corporate 2,052,322 47.0% 2,227,695 45.0% 8.5%
    Deposits 5,239,968 6,347,046 21.1%
    CASA 2,095,529 40.0% 2,878,730 45.4% 37.4%
    Term deposits 3,144,438 60.0% 3,468,316 54.6% 10.3%
    Credit deposit ratio 83.3% 78.0%

  • HDFC Bank continued to see stable NPA numbers. Gross NPAs were at 1.05% while net NPAs at 0.3% of advances respectively, the provisions and contingencies went up almost 9.5% YoY.
  • As of March 2016, the bank's distribution network was at 4,555 branches and 12,087 ATMs in 2,597 cities. 52% of the bank's branches are now in semi urban and rural areas.
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