HDFC Bank Ltd. - Q1 FY23 Earning Highlights | Globe Capital Market LTD.
HDFC Bank Ltd. – Q1 FY23 Earning Highlights

Lagged markets' expectations in Q1 due to higher treasury loss, operating expenses, and slippages in some segments. .          

Q1 FY23 Earning Overview and Verdict
Rs. 1345
Missed the market estimates

Q1FY23 Earning Key Highlights

  • HDFC Banks’ Q1 profit rose 19% YoY to ₹9,196 crore, compared to ₹7,730 crore in the same period last year, driven by higher income and decline in provisions.
  • Net interest income (NII) stood at ₹19,481.4 crore increasing by 14.5% from ₹17,009 crore in the June quarter a year ago.
  • Net interest margin stood stable at 4% versus 4.2% in Q1FY22.
  • Provisions and contingencies declined to ₹3,187.7 crore in the quarter under review compared to ₹4,830.8 crore for the quarter ended June 30, 2021.
  • Gross non-performing assets were at 1.28% of gross advances (1.06% excluding NPAs in the seasonal agricultural segment) compared to 1.47% of Q1FY22 (1.26% excluding NPAs in the seasonal agricultural segment.
  • Net NPA at 0.35% was up 3bps QoQ with coverage ratio being maintained at 72.9%.
  • The total credit cost ratio was at 0.91%, as compared to 1.67% in Q1FY22.
  • The bank’s operating expenses shoot up by 28.7% to ₹10,501.8 crore from ₹8,160.4 crore during the corresponding quarter of the previous year.
  • As of June 30, 2022, HDFC Bank registered robust growth in deposits and lending books. It garnered total advances of ₹1,395,068 crore increasing by 21.6% yoy, while deposits increased by 19.2% yoy to ₹1,604,760 crore.
  • Retail loans grew by around 21.5% YOY. The commercial & rural banking loans grew by around 29.0% YOY and corporate & other wholesale loans grew by around 15.5% YOY.
  • CASA grew 20% YOY, down 2.2% sequentially and the CASA ratio stood at 46% vs 48.2% QOQ.


Management Takeaways

  • As per the management, there is a big opportunity to take the Bank to several underbanked areas in the country. The Bank would look at opportunities to further expand the current network of over 6,000 branches to help enhance its liability base, vital for pushing credit growth. The Bank has added 36 branches and 10,932 employees during the quarter. Over the last twelve months, the lender added 725 branches and 29,038 employees.
  • The management had identified Retail Assets, Commercial and Rural Banking, Corporate Banking, Government and Institutional Banking, Wealth Management, and Payments as growth engines. The management is happy to states that the board has made progress across all these. Alongside, focus on technology remains, to maintain a competitive edge in customer service, product innovation as well as secure banking practices.
  • Merger Update: The chairman said, after merger the merged entity will have a large and more stable balance sheet & would also enable to step up its exposures and facilitate higher credit growth in the economy.
  • The Bank is also harnessing the strength of various digital platforms developed by Fintechs and other Startups to harness a larger customer base and improve the reach of the Bank and innovate new products. There is a strong growth visible in semi-urban and rural areas of the country.

Valuation & View

At the CMP of Rs. 1345, the stock is trading at ttm P/BV multiple of 2.94 times with the ttm book value of Rs 461, which looks fairly valued.


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