21 October 2015
2QFY16 Result Update | Sector:
Financials
BSE SENSEX
27,288
Bloomberg
Equity Shares (m)
M.Cap (INR b)/(USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val (INRm)
Free float (%)
S&P CNX
8,252
HDFCB IN
2,506.5
2744/42.2
1,128/888
0/10/20
1,876
78.4
CMP: INR1,095
TP: INR1,350 (+23%)
HDFC Bank
Buy
In line; strong retail loan growth and branch expansion continue
Financials & Valuation (INR Billion)
Y/E Mar
NII
OP
NP
NIM (%)
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
ABV/Sh. (INR)
RoE (%)
RoA (%)
Payout (%)
Valuations
P/E(X)
P/BV (X)
P/ABV (X)
Div. Yield (%)
2016E 2017E 2018E
271.6
211.7
123.1
4.6
49.1
20.5
285
282
18.4
1.9
23.4
22.3
3.8
3.9
0.9
328.8
255.4
148.6
4.5
59.3
20.7
331
327
19.3
1.9
23.4
18.5
3.3
3.4
1.1
400.1
310.3
178.5
4.4
71.2
20.1
385
380
19.9
1.8
23.4
15.4
2.8
2.9
1.3
HDFC Bank's (HDFCB) 2QFY16 PAT grew 20% YoY (in line) to INR28.7b. Strong
retail loan growth (10% QoQ, 29% YoY), healthy fee income growth of 22% YoY,
robust SA growth of 19% YoY and continued branch expansion (+125 QoQ, +625
YoY to 4,227) were the key highlights of the quarter.
Loan growth (+10% QoQ and 28% YoY) was driven by a) business banking (+13%
QoQ and +24% YoY), b) personal loan (+12% QoQ, +39% YoY), c) Kissan Gold Card
(+16% QoQ, +51% YoY) and d) CV/CE (+9% QoQ, +18% YoY). Further, cut in base
rate (35bp) during the quarter (earlier than competitors) helped the bank gain
market share in corporate loans (+9% QoQ, +26% YoY). Share of retail loans
(based on HDFCB classification) increased to 63% from 62% in 2QFY15.
Led by strong loan growth, core revenue (NII+Fees) growth remains healthy
(20%+ YoY over the last five quarters)—giving HDFCB avenues to expand
aggressively (branches +17% YoY, headcount +11% YoY) and invest in the
digitalization initiatives without impact on cost ratios (C/I ratio in the 45-47%
range).
Other highlights:
a) CASA ratio remained stable QoQ at 40%; b) HDFCB made
INR500m of floating provisions; c) NSL remains the lowest among peers at 35bp;
d) CET1 ratio remained stable QoQ at 12.8%.
Valuation and view:
HDFCB is best placed in the current environment, with ~40%
CASA ratio, growth outlook of at least 1.3x industry and lowest asset quality risk. With
CET1 of ~12.8%, strong capacity building in the moderate growth cycle (branches at
4,227 v/s 1,412 in FY09) and significant digitalization initiatives, the bank is well
placed to benefit from the expected pick-up in the economic growth cycle. Despite
the recent capital raising, RoE is expected to be ~19-20% in FY17/18. Comfort on
earnings remains high. Maintain
Buy
with a target price of INR1,350 (4x FY17E BV).
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415
Dhaval Gada
(Dhaval.Gada@MotilalOswal.com); +91 22 3982 5505
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

HDFC Bank
Exhibit 1: Quarterly Performance: In-line with estimate
Y/E March
Net Interest Income
% Change (Y-o-Y)
Other Income
Net Income
Operating Expenses
Operating Profit
% Change (Y-o-Y)
Other Provisions
Profit before Tax
Tax Provisions
Net Profit
% Change (Y-o-Y)
2QFY16A
66,809
21
25,518
92,327
41,898
50,429
24
6,813
43,616
14,922
28,695
20
2QFY16E
66,203
20
25,296
91,500
44,272
47,228
16
3,750
43,478
14,783
28,695
20
V/S our Est
1
1
1
-5
7
82
0
1
0
Comments
Inline performance; Reported NIMs decline 10bp QoQ
Inline; core fee income growth remains healthy at 22% YoY
Beat driven by strong control in non-staff expenses (19% YoY
v/s 29% YoY in 1Q)
Operating leverage help boost profitability
Higher than expected led by higher standard asset provisioning
and INR500m floating provisions
Higher provisioning compensated by beat on operating
performance leading to inline PAT
Source: MOSL, Company
CV segment growth driven
by MHCV segment – which
is driven by replacement
demand and regulatory
changes
Strong traction loan growth across segments
Reported loans grew 28% YoY and 10% QoQ, driven by strong growth across
segments. Retail (based on internal classification) loans grew +10% QoQ and
+29% YoY and corporate grew +9% QoQ and +26% YoY (v/s 17% YoY in 1QFY16).
Sequential growth in retail loans was mainly driven by strong growth in a)
business banking (+13% QoQ and +24% YoY v/s 19% YoY in 1QFY16), b) personal
loan (+12% QoQ, +39% YoY v/s 34% YoY in 1Q), c) Kissan Gold Card (+16% QoQ,
+51% YoY v/s 52% YoY in 1Q); d) CV/CE loans grew 9% QoQ (18% YoY) v/s +6%
QoQ (14% YoY) in 1QFY16.
Strong sequential corporate loan growth was driven by large corporate demand
seen post sharp base rate cut (35bp cut in August end) and increasing demand
from emerging corporate book (ECB). Overall average interest earning assets
increased 30% YoY (+7% QoQ) as against 26% YoY in 1QFY16.
Corporate and international loans forms ~37% of the loan book v/s ~38% in
2QFY15.
Reported NIM decline 30bp
in past three quarters
NIM moderates further; CASA ratio remains stable at ~40%
Reported NIM moderated 10bp QoQ to 4.2% - impacted by base rate cut and
high growth in corporate loans. Cost of funds was stable QoQ, despite strong
growth seen in term deposits growth in 1Q (+38% YoY and +16% QoQ). Overall
NII growth (21% YoY and +5% QoQ) was much lower than loan growth.
CASA deposits grew 19% YoY and +5% QoQ v/s 20% YoY a quarter ago.
SA deposits grew by +5% QoQ (19% YoY) v/s flat QoQ in 1QFY16.
Fee income growth remains
rd
strong at 20% + YoY (3
quarter in a row)
Healthy growth in fee income continues
HDFCB reported strong growth in non-interest income (25% YoY), led by
continued traction in fees (+22% YoY, similar to the last quarter) and FX income
(+44% YoY).
Fee income growth was driven by (a) strong traction in retail loan processing, (b)
pick-up in third party distribution fees (especially life insurance) and (b)
wholesale linked fees.
21 October 2015
2

HDFC Bank
Opex growth trails revenue growth
Overall opex grew by +20% YoY (5% QoQ) v/s 26% YoY in 1QFY16 – lower than
22% revenue growth; led by stable staff cost growth (+21% YoY, similar to 1Q).
The bank added ~4,000 employees during the quarter (v/s 1400 in 1Q), taking
the overall number of employees to ~83400 (11% YoY).
Other operating expense grew by 5% QoQ –led by steady branch addition partly
offset by ATM network rationalization (-286 QoQ).
Cost-to-income ratio remained stable QoQ at ~45%. As the branches mature,
the management expects the ratio to stabilize/decline over the medium term.
Net stress loans lowest at 35bp
On a sequential basis asset quality movement remains stable QoQ (based on
Basel III disclosures). In absolute terms, GNPA increased 12% QoQ while NNPA
increased 15% QoQ.
In percentage terms, GNPA ratio remained broadly stable at 0.95% (+2bp QoQ)
while NNPA ratio increased to 0.27% (+7bp QoQ). Restructured standard loan
portfolio remained stable QoQ at 0.1% of loans. Consequently, net stress loans
increased marginally to 37bp v/s 30bp last quarter.
Other highlights
During the quarter, bank added 126 branches (v/s 87 in 1QFY16) and reduced
the number of ATMs by 286 (v/s + 186 in 1Q).
CAR stood at 15.5%, with Tier 1 at 12.8% - stable QoQ.
2QFY16 conference call highlights
BS Related
Strong traction in corporate loan growth was driven by large corporate demand
(lowest base rate in Sept-15) and increasing demand from existing emerging
corporate customers
HDFCB continues to gain market share in CV/CE (led by MHCV essentially driven
by replacement demand and partly from regulatory change)
Growth in two and four wheeler segment was driven by market share gain and
higher ticket size
Off late, HDFCB has also started taking non PSL home loan book on the balance
sheet from HDFC Ltd. In the past, HDFCB was taking 40-50% of the loan
origination v/s 70% of the origination now
KGC loans share in the overall loans are not yet at the desired level. Thus, catch
up is leading to strong loan growth; Entire book qualifies for direct agri lending
Loan against property book currently growing in lower 20s; lending is primarily
based on cash flows
FCNR deposits are maturing in Oct-16
Other highlights
Branch expansion is driven by a) adding new location (half of the new branches
in new locations) b) focus on customer acquisition and then move customers
from physical to digital channels
21 October 2015
3

HDFC Bank
Margins will remain in the range of 4.1-4.4%, despite the high competition in
retail loans, helped by re-pricing of deposits and high share of fixed rate book;
currently, HDFCB is on marginal cost of funds for calculating base rate. However,
some components will go under change post the final guidelines from RBI
During the quarter strong growth in fees is driven by a) strong growth in third
party distribution fees especially in life insurance b) credit card interchange fees
and c) business banking and ECG wholesale fees
As the higher origination of loans will happen through digital channel, cost to
income ratio will lower in the medium term
Out 8-9 segments for retail fees, top 3 contributors are a) Third party
distribution (largest; accounts for 12-13% of overall fees) b) cards business and
c) Transaction fees
Risk weighted assets stood at INR4.9 trillion as of Sep-15
Stock of outstanding floating provision stands at INR16.4b
Valuation and view
Buy with a target price of
INR1,350 (4x FY17E BV)
21 October 2015
Structural drivers in place with (1) CASA ratio of ~40%, (2) growth outlook of at
least 1.3x the industry growth, (3) improving operating efficiency led by
digitalization initiatives, (4) expected traction in income due to strong expansion
in branch network, and (5) best-in-class asset quality.
Retail loan growth is seeing a strong revival with the contribution from high ROE
retail products like unsecured personal loans, LAS and Credit cards going up.
Despite the moderate growth in underlying assets like Auto, CV and CE loans –
HDFCB is seeing the strong loan growth-Indicating a market share gain. Base
rate will continue to be the lowest in the system, helped lowest cost of funds
(funded by retail liabilities), which will lead to market share gain in wholesale
business. Impact of Base Rate cut will be significantly lower for HDFCB as only
30% of book linked to base rate v/s 65-70% for peer bank.
Led by strong loan growth revenue growth remains very healthy at ~22% over
last five quarter, which is giving bank avenues to expand aggressively (branches
up 17% YoY, headcount up 11% YoY) and invest in the digitalization without
much impact on cost ratios (C/I ratio remains in the range of 45-47%). With
growth momentum remaining healthy, core revenues are expected to remain
20%+ from hereon.
Despite pricing pressure, NIMs are expected to remain at the current levels as a)
CASA growth will pick up, b) benefit of falling rate cycle will occur due to high
share of fixed rate retail loans (~70% of book) and c) high-yielding retail loans
contribution will rise.
The biggest risk to earnings for private financials is the implementation of
dynamic provisioning by RBI, wherein HDFCB is best placed due to floating
provisions created during the last three years. HDFCB carries floating provisions
of ~INR17b—created to smoothen earnings growth led by better-than-factored
credit cost on retail loans.
Earnings CAGR of 20% (best amongst the large private banks), with core income
growth pick-up led by healthy loan growth, superior NIMs, gradual improvement
in fee income and operating efficiencies led by digital initiatives .
Over the last 12 years, HDFCB’s market share has increased significantly in (1)
retail loans, (2) low-cost deposits and (3) profitability, indicating the strength of
4

HDFC Bank
its franchisee. Strong fundamentals and near-nil stress loans would enable the
bank to gain market share. RoEs are expected to be the best amongst private
banks at ~20%. The stock trades at FY17 PBV/PE of 3.3x/18.5x.
We maintain Buy with the target price of INR1350 (4x PBV FY17)
based on the
residual income growth model. Our key assumptions are a) Risk free rate of
7.5% b) Risk premium of 5% c) Beta of 0.9x d) average growth of ~15% over
FY15-35E and e) terminal growth rate of 5%.
Exhibit 3: One year forward P/E
Avg(x)
Min(x)
5.0
42
34
3.5
1.9
26
18
10
13.9
21.1
19.7
PE (x)
Peak(x)
Avg(x)
Min(x)
35.1
Exhibit 2: One year forward P/BV
5.5
4.5
3.5
2.5
1.5
3.4
PB (x)
Peak(x)
Source: Company, MOSL
Source: Company, MOSL
Exhibit 4: DuPont Analysis: Improvement in risk adjusted NIMs and operating leverage; RoAs near decadal high (%)
Y/E March
Net Interest Income
Core Fee Income
Fee to core Income
Core Income
Operating Expenses
Cost to Core Income
Employee cost
Others
Core operating Profits
Trading and others
Operating Profits
Provisions
NPA
Others
PBT
Tax
Tax Rate
RoA
Leverage (x)
RoE
FY08
5.03
1.57
23.8
6.60
3.84
58.2
1.16
2.68
2.75
0.66
3.41
1.38
1.14
0.24
2.03
0.62
30.3
1.42
12.5
17.7
FY09
4.85
1.46
23.1
6.31
3.76
59.6
1.41
2.35
2.55
0.88
3.43
1.34
1.25
0.10
2.09
0.67
32.0
1.42
11.9
16.9
FY10
4.28
1.49
25.9
5.77
3.19
55.3
1.13
2.06
2.58
0.76
3.34
1.23
1.13
0.10
2.11
0.66
31.3
1.45
11.1
16.1
FY11
4.40
1.39
24.0
5.79
3.11
53.8
1.13
1.98
2.67
0.59
3.27
0.94
0.48
0.46
2.33
0.76
32.5
1.57
10.7
16.7
FY12
4.19
1.37
24.6
5.56
3.02
54.3
1.11
1.91
2.54
0.51
3.05
0.61
0.35
0.26
2.44
0.76
31.2
1.68
11.1
18.7
FY13
4.28
1.34
23.9
5.63
3.04
54.1
1.07
1.97
2.58
0.51
3.10
0.45
0.33
0.12
2.64
0.82
31.0
1.82
11.2
20.3
FY14
4.14
1.30
23.8
5.44
2.70
49.6
0.94
1.76
2.74
0.48
3.22
0.36
0.37
-0.01
2.86
0.96
33.6
1.90
11.2
21.3
FY15
4.14
1.23
22.9
5.37
2.59
48.1
0.88
1.71
2.79
0.43
3.22
0.38
0.32
0.07
2.83
0.94
33.4
1.89
10.3
19.4
FY16E
FY17E
FY18E
4.16
4.09
4.08
1.21
1.16
1.12
22.5
22.2
21.5
5.37
5.26
5.19
2.64
2.57
2.53
49.2
48.9
48.6
0.87
0.86
0.85
1.77
1.71
1.67
2.73
2.68
2.67
0.46
0.42
0.39
3.19
3.11
3.06
0.33
0.35
0.36
0.31
0.32
0.33
0.02
0.03
0.03
2.86
2.76
2.70
0.97
0.90
0.88
34.0
32.5
32.5
1.89
1.86
1.82
9.8
10.3
10.9
18.4
19.2
19.9
Source: Company, MOSL
21 October 2015
5

HDFC Bank
Exhibit 5: DuPont Analysis: Stable core operating performance led to stable return ratios
4QFY13
NII
4.38
Fees (ex-forex)
1.41
Fees to core Inc.
32.2
Core Income
5.79
Operating Expenses
3.20
C to Core Inc (%)
55.2
Employee Expenses
1.03
Other Expenses
2.17
Core Oper. Profit
2.59
Trading and others
0.43
Operating Profit
3.02
Provisions
0.31
PBT
2.72
Tax
0.79
Tax Rate
29.0
ROA
1.93
Leverage (x)
10.9
ROE
21.1
1QFY14
4.33
1.26
29.1
5.59
2.98
53.3
1.09
1.89
2.61
0.63
3.24
0.52
2.72
0.92
33.6
1.81
10.9
19.8
2QFY14
4.23
1.28
30.3
5.50
2.77
50.3
0.98
1.79
2.73
0.46
3.20
0.36
2.83
0.96
33.9
1.87
10.7
20.1
3QFY14
4.12
1.40
34.0
5.52
2.58
46.6
0.87
1.71
2.95
0.51
3.46
0.35
3.11
1.04
33.5
2.07
10.8
22.3
4QFY14
4.13
1.27
30.7
5.40
2.65
49.0
0.88
1.76
2.75
0.40
3.15
0.24
2.91
0.97
33.4
1.94
11.1
21.5
1QFY15
4.21
1.14
27.2
5.35
2.59
48.3
0.92
1.67
2.77
0.36
3.13
0.39
2.74
0.92
33.6
1.82
11.0
20.0
2QFY15
4.40
1.23
27.9
5.63
2.79
49.6
0.93
1.86
2.84
0.41
3.24
0.36
2.88
0.98
33.9
1.90
10.6
20.1
3QFY15
4.36
1.38
31.7
5.75
2.65
46.0
0.87
1.78
3.10
0.56
3.66
0.43
3.23
1.09
33.8
2.14
10.4
22.3
4QFY15 1QFY16 2QFY16
4.27
4.19
4.15
1.30
1.12
1.16
30.5
26.8
28.0
5.58
5.31
5.30
2.74
2.62
2.60
49.1
49.4
49.0
0.94
0.89
0.88
1.80
1.73
1.72
2.84
2.69
2.71
0.52
0.49
0.42
3.36
3.18
3.13
0.41
0.48
0.42
2.95
2.70
2.71
0.95
0.94
0.93
32.3
34.6
34.2
2.00
1.77
1.78
9.9
9.6
9.7
19.8
17.0
17.2
Source: Company, MOSL
21 October 2015
6

HDFC Bank
Story in charts
Exhibit 6: Robust loan growth driven by improving traction
across segments
Loans (INR b)
YoY Growth (%)
Exhibit 7: Deposits growth driven by strong growth in term
deposits
Deposits (INR b)
YoY Gr (%)
30 30
28
24 23 21
23 26 21 22
20 20 22 22 22 23
17 21 22
16
23 24 23 25 19 23
21 18 22 19 22 20 18
15 18
14
Source: MOSL, Company
Source: MOSL, Company
Exhibit 8:
Strong CASA deposit growth continues; CASA ratio
remains stable QoQ
CASA Deposits (INR b)
CASA Ratio (%)
Exhibit 9: Reported margins decline QoQ while calculated
margins remain broadly stable
4.6
4.4
4.2
4.1 4.1
4.4
4.3
4.6 4.6
4.3
4.4 4.4
4.2
4.5
4.4 4.4
4.3
4.2
Source: MOSL, Company
Source: MOSL, Company
Exhibit 10:
Retail loan growth close to 30% levels (based on
internal classification) – now stands at ~63% of loan book
Loan Break-up
% of
1HFY16 1HFY15
(INR b)
loans
Auto
12.8
536
440
PL
7.7
324
233
LAS
0.4
15
11
2Wheerlers
1.4
58
45
CV and CE
6.9
290
245
CC
4.3
180
140
Bus. Banking
13.7
575
465
Home loans
6.8
285
196
Gold loans
1.0
43
39
Kissan gold cards 4.7
195
129
Others
2.9
121
85
Retail loans
62.7 2,622 2,028
Corp and
37.3 1,563 1,244
International
Total loans
100.0 4,185 3,273
YoY Gr
QoQ Gr
1QFY16
(%)
(%)
21.8
501
7.1
38.9
291
11.6
42.5
13
13.7
28.1
53
9.1
18.4
265
9.4
28.5
169
6.7
23.6
510
12.8
45.6
269
5.9
12.5
42
2.5
51.2
169
15.6
41.2
107
12.2
29.3 2,389
9.8
25.6
1,432
9.2
Exhibit 11:
Proportion of CV/CE loans stabilizes
%age of overall loans
Source: MOSL, Company
27.9 3,820
9.6
Source: MOSL, Company
21 October 2015
7

HDFC Bank
Story in charts
Exhibit 12:
Fee income growth healthy – three consecutive
quarters of 20%+ YoY growth
Fee Inc.(INR b)
1.3 1.3
1.4 1.5
1.3 1.3
1.5 1.4
1.3
Fee Inc. as % of Avg. Assets
1.3 1.4
1.3 1.1 1.2 1.4 1.3
83
1.1 1.2
82
84
83
Exhibit 13:
CD Ratio spikes back to 80%+ levels
CD Ratio
85 85
85 86 85
82
79
84 84 84
83
81
79
81
Source: MOSL, Company
Source: MOSL, Company
Exhibit 14:
ATMs decline QoQ (286) while branch addition
continues (126 added); added 627branches in last one year
Branches
ATM
Exhibit 15: GNPA ratio largely remains stable
Gross NPAs (%)
1.0 1.0 1.0 1.0 1.0
0.9
1.0 1.0 1.0
1.1
Net NPAs (%)
1.0 1.0 1.1 1.0 1.0 0.9 1.0
0.3 0.3 0.3 0.3
0.9
0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
0.3 0.3
0.2
0.2 0.3 0.3
Source: MOSL, Company
Source: MOSL, Company
21 October 2015
8

HDFC Bank
Exhibit 16: Quarterly Snapshot
FY14
1Q
Profit and Loss (INR m)
Net Interest Income
Other Income
Trading profits
Exchange Profits
Others (Ex non core)
Total Income
Operating Expenses
Employee
Others
Operating Profits
Provisions
PBT
Taxes
PAT
Asset Quality
GNPA
NNPA
GNPA (%)
NNPA (%)
PCR (Calculated, %)
Ratios (%)
Fees to Total Income
Cost to Core Income
Tax Rate
CASA (Reported)
Loan/Deposit
RoA
RoE
Margins (%) - Calculated
Yield on loans
Yield On Investments
Yield on funds
Cost of funds
Spreads
Margins
Margins (%) - Reported
44,187
19,256
1,995
3,143
14,118
63,443
30,382
11,091
19,291
33,061
5,271
27,790
9,351
18,439
27,190
6,890
1.0
0.3
74.7
22.3
49.4
33.6
44.7
85.3
1.8
19.8
11.8
8.2
10.5
6.2
4.3
4.8
4.6
2Q
44,765
18,444
-1,733
5,014
15,163
63,209
29,342
10,357
18,985
33,867
3,859
30,007
10,184
19,823
29,417
7,672
1.1
0.3
73.9
24.0
45.2
33.9
45.0
85.8
1.9
20.1
11.7
8.9
10.8
6.5
4.3
4.8
4.3
3Q
46,348
21,483
509
3,332
17,642
67,830
28,951
9,730
19,221
38,880
3,888
34,991
11,734
23,257
30,178
7,973
1.0
0.2
73.6
26.0
43.0
33.5
43.7
85.0
2.1
22.3
11.6
8.7
10.6
6.4
4.2
4.6
4.2
4Q
49,527
20,014
333
2,521
17,160
69,541
31,747
10,612
21,135
37,794
2,861
34,933
11,667
23,266
29,893
8,200
1.0
0.3
72.6
24.7
45.9
33.4
44.8
82.5
1.9
21.5
11.3
7.7
10.0
5.8
4.2
4.6
4.4
1Q
51,716
18,506
250
2,242
16,014
70,222
31,784
11,259
20,525
38,438
4,828
33,610
11,280
22,330
33,562
10,074
1.1
0.3
70.0
22.8
45.4
33.6
43.0
83.9
1.8
20.0
11.4
7.4
10.4
5.9
4.4
4.8
4.4
2Q
55,110
20,471
951
2,217
17,303
75,581
34,979
11,669
23,310
40,602
4,559
36,043
12,228
23,815
33,617
9,173
1.0
0.3
72.7
22.9
46.9
33.9
43.2
83.8
1.9
20.1
11.4
8.6
10.7
6.0
4.7
5.0
4.5
FY15
3Q
56,999
25,349
2,655
2,534
20,160
82,348
34,563
11,325
23,238
47,786
5,604
42,181
14,236
27,945
34,679
9,037
1.0
0.3
73.9
24.5
43.4
33.8
40.9
83.8
2.1
22.3
11.3
8.6
10.5
6.1
4.4
4.8
4.4
4Q
60,132
25,638
1,961
3,287
20,390
85,769
38,550
13,256
25,294
47,220
5,767
41,453
13,384
28,069
34,384
8,963
0.9
0.2
73.9
23.8
46.0
32.3
44.0
81.1
2.0
19.8
11.0
7.6
10.1
5.9
4.2
4.7
4.4
1Q
63,888
24,619
1,259
3,480
19,880
88,507
40,008
13,590
26,418
48,499
7,280
41,219
14,262
26,957
38,522
10,277
1.0
0.3
73.3
22.5
45.9
34.6
39.6
78.9
1.8
17.0
11.2
7.7
10.1
6.0
4.2
4.6
4.3
FY16
2Q
66,809
25,518
1,624
3,196
20,698
92,327
41,898
14,140
27,758
50,429
6,813
43,616
14,922
28,695
38,278
10,377
0.9
0.3
72.9
22.4
46.2
34.2
40.0
82.6
1.8
17.2
10.9
-24
-41
7.9
16
-68
10.1
1
-60
5.9
-2
-10
4.2
3
-50
4.6
-2
-41
4.2
-10
-30
Source: MOSL, Company
Variation (%)
QoQ YoY
5
4
29
-8
4
4
5
4
5
4
-6
6
5
6
-1
1
-4
-2
-43
21
25
71
44
20
22
20
21
19
24
49
21
22
20
14
13
-11
-3
18
21 October 2015
9

HDFC Bank
Exhibit 17: Quarterly Snapshot continued
FY14
1Q
Balance Sheet (INR b)
ESC
Reserves and Surplus
Net Worth
Deposits
Borrowings+Sub Debt
Other Liabilities
Total Liabilities
5
379
384
3,033
391
355
4,163
2Q
5
400
405
3,130
393
383
4,312
3Q
5
424
429
3,492
438
322
4,681
4Q
5
430
435
3,673
394
413
4,916
1Q
5
456
460
3,721
386
346
4,914
221
80
1,088
3,121
4,290
29
374
4,914
48.1
11.1
6.9
0.3
1.1
4.3
4.3
7.1
6.3
1.2
3.5
2.0
51.9
3,488
11,428
2Q
5
482
487
3,907
385
320
5,100
204
113
1,154
3,273
4,540
29
327
5,100
48.3
11.5
7.1
0.3
1.1
4.2
4.3
6.7
6.0
1.2
3.9
2.0
51.7
3,600
11,515
FY15
3Q
5
512
517
4,141
397
294
5,349
210
121
1,340
3,471
4,931
29
178
5,349
47.5
11.5
7.1
0.3
1.1
3.8
4.4
6.1
5.8
1.1
3.9
2.1
52.5
3,659
11,633
4Q
5
615
620
4,508
452
325
5,905
275
88
1,516
3,655
5,260
31
339
5,905
47.3
11.1
7.1
0.4
1.1
3.5
4.4
5.2
6.6
1.1
4.4
2.4
52.7
4,014
11,766
1Q
5
645
650
4,842
469
332
6,293
244
143
1,724
3,820
5,687
32
331
6,293
49.0
11.4
7.5
0.3
1.1
3.5
4.4
6.3
7.0
1.1
4.4
2.0
51.0
4,101
11,952
FY16
2Q
5
678
683
5,069
523
325
6,600
257
78
1,713
4,185
5,976
32
335
6,600
48.8
11.0
7.6
0.3
1.1
3.5
4.3
6.5
6.8
1.0
4.6
2.1
51.2
4,227
11,666
Variation (%)
QoQ
YoY
0
5
5
5
11
-2
5
5
-46
-1
10
5
1
1
5
-17
-38
7
0
-2
3
-11
23
-23
-8
23
9
17
3
-2
4
41
40
30
36
2
29
26
-31
48
28
32
11
2
29
53
-55
55
-6
2
-70
2
-19
83
-15
65
12
-53
17
1
Cash
190
199
213
253
Money at call
64
81
139
142
Investments
1,048
1,019
1,106
1,210
Advances
2,586
2,686
2,967
3,030
Total earning assets
3,699
3,786
4,213
4,382
Fixed Assets
29
29
29
29
Other Assets
246
297
226
251
Total Assets
4,163
4,312
4,681
4,916
Loan Break Up (%)
Retail
54.3
53.6
49.7
49.4
Auto Loans
12.5
12.1
11.3
10.9
Personal Loans
7.2
7.2
6.8
6.7
Loan against securities
0.4
0.4
0.3
0.4
Two wheeler
1.2
1.2
1.1
1.1
CV & CE
6.5
6.3
5.6
4.8
Credit Cards
4.1
4.0
3.9
4.0
Business Banking
9.2
9.6
9.0
8.3
Home loans
6.6
6.1
5.4
6.4
Gold loans
1.8
1.6
1.4
1.3
Kissan Gold Cards
2.9
2.9
3.5
Other Retail loans
2.3
2.2
1.9
2.0
Corp. & International
45.7
46.4
50.3
50.6
Franchise
Branches
3,119
3,251
3,336
3,403
ATM
11,088 11,177 11,473 11,256
Note: Retail loan break-up is based on regulatory classification
Source: Company, MOSL
21 October 2015
10

HDFC Bank
Exhibit 18: Financials - Valuation metrics
66
Rating
ICICIBC*
HDFCB
AXSB
KMB*
YES
IIB
DCBB
FB
JKBK
SIB
Private Aggregate
SBIN (cons)*
PNB
BOI
BOB
CBK
UNBK
OBC
INBK
CRPBK
ANDB
IDBI
DBNK
Public Aggregate
HDFC*
LICHF
DEWH
IHFL
GRHF
REPCO
IDFC
RECL
POWF
SHTF
MMFS
BAF
MUTH
NBFC Aggregate
Buy
Buy
Buy
Neutral
Buy
Buy
Sell
Neutral
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
Buy
CMP
Mcap
EPS (INR)
P/E (x)
BV (INR)
P/BV (x)
FY17
1.42
3.31
2.01
3.16
1.99
2.82
1.39
1.20
0.60
0.73
2.40
0.95
0.57
0.33
0.88
0.49
0.49
0.28
0.45
0.29
0.36
0.49
0.31
0.66
4.11
2.19
1.16
2.42
8.93
3.81
0.27
0.72
0.75
1.89
2.02
3.38
1.55
2.39
RoA (%)
FY16
1.54
1.89
1.78
1.01
1.68
2.04
0.84
1.02
0.85
0.55
0.70
0.57
0.20
0.61
0.39
0.56
0.57
0.50
0.54
0.55
0.58
0.36
2.60
1.48
1.27
4.08
2.18
2.20
1.75
3.22
3.07
2.10
1.92
3.13
2.75
FY17
1.58
1.86
1.82
1.32
1.73
2.08
0.73
1.06
0.92
0.58
0.77
0.70
0.25
0.68
0.48
0.65
0.69
0.65
0.64
0.62
0.69
0.44
2.60
1.55
1.29
4.19
2.05
2.32
1.83
3.23
3.03
2.28
2.20
2.84
2.83
RoE (%)
FY16
14.8
18.4
18.0
13.9
19.7
17.6
9.3
11.4
10.7
9.4
11.7
9.3
4.8
11.7
8.1
11.8
10.1
7.8
12.3
10.3
9.5
7.2
23.6
20.1
15.6
26.5
28.9
17.3
8.8
22.9
20.4
14.1
11.5
19.8
14.7
FY17
15.7
19.2
18.3
14.5
20.9
16.1
9.2
13.0
12.1
10.3
13.1
11.6
6.4
13.1
10.0
13.9
12.8
10.6
14.7
12.2
11.9
9.6
24.4
21.3
17.3
24.7
28.6
20.4
9.8
22.9
19.7
14.9
13.2
17.9
16.0
(INR) (USDb) FY16 FY17
286
25.1 21.5 25.8
1,095 41.6 49.1 59.2
509
18.3 36.5 43.3
655
18.1 18.2 25.3
770
4.9 59.9 74.5
957
8.5 41.3 51.3
92
0.4
5.4 5.8
65
1.7
5.4 6.7
90
0.7 14.1 17.3
22
0.5
2.5 3.1
119.7
254
29.2 25.6 31.7
138
3.9 19.6 26.8
142
1.4 19.4 27.1
176
1.2 20.3 25.1
300
2.3 43.8 59.7
174
1.7 35.7 46.6
145
0.7 46.3 63.8
137
1.0 21.1 30.6
45
0.1 16.5 21.9
70
0.6 17.8 22.8
85
2.1 14.4 19.7
43
0.4
8.8 12.5
44.5
1,313 31.3
38
44
473
3.6
34
42
237
1.0
26
33
738
4.8
57
72
254
1.4
7
9
693
0.7
24
34
62
1.5
10
12
260
3.9
63
76
245
4.9
54
60
974
3.3
62
73
242
2.1
12
15
5,306
4.3
222 261
188
5.7
20
24
62.8
FY16 FY17 FY16 FY17 FY16
10.3 8.2 131 150 1.69
22.3 18.5 285 330 3.84
13.9 11.8 218 254 2.33
36.0 25.9 182 207 3.59
12.9 10.3 327 387 2.35
23.2 18.7 295 340 3.24
17.1 15.8 60
66
1.53
12.1 9.7
49
54
1.33
6.4
5.2 136 150 0.66
8.8
7.3
29
31
0.79
18.1 15.1
2.74
9.5
7.6 229 255 1.06
7.0
5.2 220 244 0.63
7.4
5.3 410 432 0.35
8.7
7.0 182 201 0.97
6.9
5.0 573 619 0.52
4.9
3.7 317 356 0.55
3.1
2.3 474 523 0.31
6.5
4.5 278 301 0.49
2.7
2.1 141 158 0.32
3.9
3.1 180 196 0.39
5.9
4.3 157 173 0.54
4.8
3.4 126 136 0.34
8.0
6.2
0.73
22.8 18.0 167 192 5.21
14.0 11.2 182 216 2.60
9.0
7.2 179 204 1.32
12.9 10.3 275 305 2.68
37.4 29.7 24
28 10.75
28.3 20.3 152 182 4.57
6.3
5.3 107 116 0.31
4.1
3.4 302 360 0.86
4.5
4.1 285 329 0.86
15.6 13.4 458 515 2.13
20.1 16.0 109 120 2.22
23.9 20.3 1,350 1,568 3.93
12.2 10.2 141 156 1.72
15.6 13.3
2.73
Source: Company, MOSL
*Multiples adj. for value of key ventures/Investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in subsidiaries
21 October 2015
11

HDFC Bank
Financials and valuations
Income Statement
Y/E March
Interest Income
Interest Expense
Net Interest Income
Change (%)
Non-Interest Income
Net Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions (excl tax)
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Equity Dividend (Incl tax)
Core PPP*
Change (%)
*Core PPP is (NII+Fee income-Opex)
2011
203,808
93,851
109,957
26.7
49,452
159,409
20.3
77,800
81,609
20.4
23,422
58,187
18,923
32.5
39,264
33.2
8,948
68,179
30.7
2012
278,742
149,896
128,846
17.2
57,836
186,682
17.1
92,776
93,906
15.1
18,774
75,132
23,461
31.2
51,671
31.6
11,749
79,428
16.5
2013
350,649
192,538
158,111
22.7
68,526
226,637
21.4
112,361
114,276
21.7
16,770
97,506
30,249
31.0
67,257
30.2
15,360
97,607
22.9
2014
411,355
226,529
184,826
16.9
79,196
264,023
16.5
120,422
143,601
25.7
15,880
127,721
42,937
33.6
84,784
26.1
19,275
122,227
25.2
2015
484,699
260,742
223,957
21.2
89,964
313,920
18.9
139,875
174,045
21.2
20,758
153,287
51,128
33.4
102,159
20.5
24,142
150,674
23.3
2016E
598,286
326,693
271,593
21.3
108,429
380,022
21.1
168,326
211,697
21.6
24,523
187,173
64,107
34.3
123,066
20.5
28,674
182,290
21.0
2017E
707,423
378,598
328,826
21.1
126,345
455,170
19.8
199,774
255,396
20.6
33,624
221,772
73,185
33.0
148,588
20.7
34,621
222,119
21.8
(INR Million)
2018E
875,322
475,175
400,147
21.7
147,312
547,459
20.3
237,113
310,346
21.5
43,905
266,441
87,926
33.0
178,516
20.1
41,594
272,673
22.8
Balance Sheet
Y/E March
Equity Share Capital
Reserves & Surplus
Net Worth
Deposits
Change (%)
of which CASA Dep
Change (%)
Borrowings
Other Liabilities & Prov.
Total Liabilities
Current Assets
Investments
Change (%)
Loans
Change (%)
Fixed Assets
Other Assets
Total Assets
2011
4,652
249,140
253,793
2,085,864
24.6
1,099,083
26.2
143,941
289,929
2,773,526
296,688
709,294
21.0
1,599,827
27.1
21,706
146,011
2,773,526
2011
16,943
2,964
1.0
0.2
82.5
2012
4,693
294,553
299,247
2,467,064
18.3
1,194,059
8.6
238,465
374,319
3,379,095
209,377
974,829
37.4
1,954,200
22.2
23,472
217,216
3,379,095
2012
19,994
3,523
1.0
0.2
82.4
2013
4,759
357,383
362,141
2,962,470
20.1
1,405,215
17.7
330,066
348,642
4,003,319
272,802
1,116,136
14.5
2,397,206
22.7
27,031
190,144
4,003,319
2013
23,346
4,690
1.0
0.2
79.9
2014
4,798
429,988
434,786
3,673,375
24.0
1,646,214
17.2
394,390
413,444
4,915,995
395,836
1,209,511
8.4
3,030,003
26.4
29,399
251,246
4,915,995
2014
29,893
8,200
1.0
0.3
72.6
2015
5,013
615,081
620,094
4,507,956
22.7
1,984,921
20.6
452,136
324,845
5,905,031
363,315
1,516,418
25.4
3,654,950
20.6
31,217
339,131
5,905,031
2015
34,384
8,963
0.9
0.2
73.9
2016E
5,013
709,473
714,486
5,589,866
24.0
2,381,905
20.0
526,532
359,279
7,190,164
354,805
1,895,522
25.0
4,532,138
24.0
34,654
373,044
7,190,164
2016E
43,263
10,327
0.9
0.2
76.1
2017E
2018E
5,013
5,013
823,440
960,361
828,453
965,374
6,987,332 8,734,166
25.0
25.0
2,888,268 3,502,500
21.3
21.3
616,225
727,280
397,830
440,916
8,829,840 10,867,736
441,601
563,806
2,274,627 2,729,552
20.0
20.0
5,665,173 7,081,466
25.0
25.0
38,091
41,528
410,349
451,383
8,829,840 10,867,736
2017E
61,840
13,313
1.1
0.2
78.5
2018E
90,584
18,817
1.3
0.3
79.2
(INR Million)
Asset Quality
Y/E March
GNPA (INR m)
NNPA (INR m)
GNPA Ratio
NNPA Ratio
PCR (Excl Tech. write off)
E: MOSL Estimates
(%)
21 October 2015
12

HDFC Bank
Financials and valuations
Ratios
Y/E March
Spreads Analysis (%)
Avg. Yield-Earning Assets
Avg. Yield on loans
Avg. Yield on Invt
Avg. Cost-Int. Bear. Liab.
Avg. Cost of Deposits
Interest Spread
Net Interest Margin
Profitability Ratios (%)
RoE
RoA
Int. Expense/Int.Income
Fee Income/Net Income
Non Int. Inc./Net Income
Efficiency Ratios (%)
Cost/Income*
Empl. Cost/Op. Exps.
Busi. per Empl. (INR m)
NP per Empl. (INR lac)
* ex treasury
Asset-Liability Profile (%)
Loans/Deposit
CASA Ratio
Investment/Deposit
CAR
Tier 1
2011
9.4
10.9
7.2
4.7
4.3
4.7
5.1
2012
10.4
11.9
7.7
6.1
5.6
4.4
4.8
2013
10.6
12.3
7.5
6.4
6.0
4.2
4.8
2014
10.3
11.7
7.8
6.2
5.7
4.1
4.6
2015
10.1
11.1
7.2
5.8
5.7
4.3
4.6
2016E
10.1
10.9
8.0
5.9
5.9
4.2
4.6
2017E
9.7
10.4
7.6
5.5
5.5
4.2
4.5
2018E
9.7
10.4
7.6
5.6
5.5
4.1
4.4
16.7
1.6
46.0
27.5
31.0
18.7
1.7
53.8
29.3
31.0
20.3
1.8
54.9
27.3
30.2
21.3
1.9
55.1
27.2
30.0
19.4
1.9
53.8
24.5
28.7
18.4
1.9
54.6
24.2
28.5
19.3
1.9
53.5
23.9
27.8
19.9
1.8
54.3
23.5
26.9
48.6
36.5
61.5
0.7
49.2
36.6
66.5
0.8
49.9
35.3
72.4
1.0
45.8
34.7
87.9
1.2
47.0
34.0
102.7
1.4
46.7
34.2
112.1
1.5
46.3
34.5
127.8
1.7
45.6
34.9
151.3
1.9
76.7
52.7
34.0
16.2
12.2
79.2
48.4
39.5
16.5
11.6
80.9
47.4
37.7
16.8
11.1
82.5
44.8
32.9
16.1
11.8
81.1
44.0
33.6
16.8
13.7
81.1
42.6
33.9
15.5
12.9
81.1
41.3
32.6
14.3
12.1
81.1
40.1
31.3
13.2
11.3
Valuation
Book Value (INR)
Change (%)
Price-BV (x)
Adjusted BV (INR)
Price-ABV (x)
EPS (INR)
Change (%)
Price-Earnings (x)
Dividend Per Sh (INR)
Dividend Yield (%)
E: MOSL Estimates
109.1
16.0
108.2
16.9
31.0
3.3
127
16.8
126.4
22.0
30.4
4.3
152
19.4
150.7
28.3
28.4
5.5
181
19.2
178.9
35.3
25.0
6.9
247
36.5
4.4
244.9
4.5
40.8
15.3
26.9
8.0
0.7
285
15.2
3.8
282.2
3.9
49.1
20.5
22.3
9.8
0.9
331
16.0
3.3
326.8
3.4
59.3
20.7
18.5
11.9
1.1
385
16.5
2.8
379.9
2.9
71.2
20.1
15.4
14.2
1.3
21 October 2015
13

HDFC Bank
Corporate profile: HDFC Bank
Company description
HDFC Bank amongst the ten private sector bank
which were awarded license post liberalization of
1990s. The bank was incorporated in August 1994
and is promoted by the biggest mortgage lender in
the country, HDFC Limited (21.6% stake). The bank
is now the second largest private sector bank in
India with asset size of INR6t+ and market share of
~5% in deposit and loans respectively. As on
September 30, 2015, the bank had a network of
4,227 branches and 11,666 ATMs spread across the
country.
Exhibit 20: Shareholding pattern (%)
Jun-15
Promoter
DII
FII
Others
21.6
10.5
51.3
16.6
Mar-15
21.7
9.7
51.4
17.2
Jun-14
22.6
10.0
50.9
16.6
Exhibit 20: Sensex rebased
Exhibit 21: Top holders
Holder Name
Aberdeen Global Indian Equity (Mauritius) Ltd
Aberdeen Global - Asian Smaller Companies Fund
Bajaj Allianz Life Insurance Company Ltd
LIC of India Market Plus 1 Growth Fund
ICICI Prudential Life Insurance Company Ltd
% Holding
6.9
2.0
1.8
1.6
1.4
Note: FII Includes depository receipts
Exhibit 22: Top management
Name
Aditya Puri
Paresh Sukthankar
Sashidhar Jagdishan
Designation
Managing Director
Deputy Managing Director
CFO
Exhibit 23: Directors
Name
Shyamala Gopinath
Aditya Puri
Paresh Sukthankar
A N Roy*
Keki Mistry
Name
Renu Karnad
Bobby Parikh*
Pandit Palande*
Partho S Datta*
Kaizad Bharucha
*Independent
Exhibit 24: Auditors
Name
BSR & Co LLP
Type
Statutory
Exhibit 25: MOSL forecast v/s consensus
EPS
(INR)
FY16
FY17
FY18
MOSL
forecast
49.1
59.3
71.2
Consensus
forecast
50.1
61.8
76.3
Variation
(%)
-2.1
-4.1
-6.7
21 October 2015
14

HDFC Bank
NOTES
21 October 2015
15

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