HDFC Q1 FY23 Earning Summary

 Loan Growth:-

Overall loan growth at 20.3%

1. Retail Loan growth made a sharp comeback to grow at 21.7%

2. Rural Banking grew at 28.9%

3. Corporate loans grew by 15.7%

Retail loan growth is steadily picking up again for HDFC Bank

Net Interest Margin(NIM) Compression:-

The NIMs had fallen to an all-time low of 4% but have now recovered to 4.2%.

The retail book constitutes just 39% of the total loans

The rapid growth in the wholesale loan book came at a lower margin

Deposit growth:-

Deposits grew at 19.2% with CASA ratio at 45.8%.

The bank continues to gain market share in deposits.

Bank is slowly hiking the deposit rates

Asset Quality:-

Gross NPAs at 1.28% vs 1.17%

The rise in the NPA is due NPAs due to agricultural loans 

Slippages ex of this remains at 38bps

The bank remains is adequately provisioned and remains in a strong position to push loan growth.

Capital Adequacy:-

The Bank is sitting on a Capital Adequacy of 18.

TIER-1 Capital Adequacy at 16.5

The bank is adequately capitalized for no

To fund the merger and meet the regulatory framework the Bank will need to raise capital in the future.

Aggressive Branch expansion:-

The Bank opened 36 branches in the last quarter.

250 branches are already in the works

The bank envisions to be 1-2 km of clients rather than the current 5-6 Km

This could inflate costs in the near term and needs to be monitored.

HDB Financial:-

COVID-19 had a severe impact on HDB financial

The pain is now beginning to ease out.

The revenues grew by 13%

PAT showed at 441cr against 88cr

Slippages are continuing to ease.

Merger Hangover:-

As HDFC gets merged with HDFC Bank RBI has approved the scheme of arrangement.

However the RBI has not commented on the dispensation on SLR,CRR sought by the bank.

Without the dispensation, the ROE of the Bank will take a hit in the near term.

So How is the result then?

The result is very stable.

Nothing to complain about.

1. Asset quality is stabilizing

2. Retail Loan growth is coming back

3. Bank is strongly capitalized to take advantage of future growth opportunities.

As the credit cycle continues to move up banks like HDFC Bank will be a major beneficiaries.

In view of the merger, the hangover on the stock may mean the stock may continue to underperform.

However, the business is on an upward trajectory.

Disclaimer:-

This is my study. Not an Investment Advise. Please consult your own investment advisor before investing.