Friday, April 20, 2012

>HDFC BANK LIMITED: Q4FY12 Result Update

Consistently consistent but limited upside

HDFC Bank’s Q4FY12 performance was in line with our expectations (PAT at Rs14.5bn). The bottom-line performance was primarily driven by healthy growth in NII while higher opex was offset by lower provisioning during the quarter. Asset quality held up well with stable %GNPA, restructuring & PCR. While consistent performance and strong asset quality have made the stock one of the safest bets in banking sector, limited upside (8%) to our fair value estimate leads us to maintain our Hold recommendation.

 NIM stable QoQ, Loan growth @ 22%: NII grew by a moderate 19.3% yoy (in-line) to Rs33.9bn led by a healthy credit growth (22% yoy) while the reported NIM was stable sequentially at 4.2%. Loan yields benefitted from higher share of retail business (incremental growth skewed towards unsecured/high yield products). However, this was offset by increase in cost of funds leading to QoQ flattish NIM (reported) at 4.2%.

 Asset quality holds up well: Asset quality continued to remain strong with GNPA stable in both absolute and relative terms. Restructured loans (including applications received and under process) were stable at 0.4% of gross advances. Despite lower provisions sequentially, PCR improved to 82.4% (from 80.3% in Q3FY12). While the slippage rate for FY12 came in at an enviable 1%, we expect this to inch up in FY13 to 1.3% led by 1) higher share of unsecured/high yield products and 2) impact of general deterioration in credit quality due to moderation.

 Healthy credit growth, CASA ratio up QoQ: The advances book grew by a healthy 22% yoy to Rs1,954bn primarily driven by the retail segment (33.7% YoY with strong growth in unsecured/high yielding products). For FY13, the share of retail segment may come off a bit due to weaker demand in key segments (auto & housing) though anticipated improvement in corporate segment should help maintain a healthy growth of 20.6% YoY. Meanwhile, deposits grew by 18.3% yoy and 6% QoQ to Rs2,467bn with CASA improving sequentially to 48.4%.