HDFC Bank – Company Performance (Q32019 Results Highlight)

The Q3 results of HDFC Bank were released/declared on 21^st January 2019.

Q3 Results Highlights

• Total Income is the interests received on the advances/loans given by the bank. Other income sources are Mutual Fund distribution income, commission income, insurance distribution, etc. A very healthy growth even with a huge base. The same growth rate has been maintained in the last 8-10 years.

• The banks receive interest on the advances given out. But to give out these advance bank need deposits like Fixed Deposits, Certificate of Deposits, Savings Account or Current Account. Here, the bank has to pay the interests. So, Net Interest Income is the total interest income minus the amount of interest amount paid out. Here also, there is very nice growth

• The amount left after deducting all the expense, liabilities, interests and taxes from the total income is the Net profit of the bank. A healthy growth can be seen here too. And this has been a consistent performance of the bank in the last 7-10 years.

• Total Deposits is the money that came in to the bank in the form of savings accounts, current accounts or Fixed Deposits. The deposits growth is also very good as expected

• Total Advances is the amount of loans given out. The growth in the loans is also significant

• Total Balance sheet is where all the assets are included. The increase in the balance sheet size is also of the same growth range.

Net Interest Margin (NIM)

Net Interest Margin is interest on advances given out minus the deposits received divide by the total amount of money invested.

HDFC Bank has a NIM of 4.3%.As it is a retail bank, 55% of the business of the bank is retail business and the other 45% is the wholesale business. Thus, the major dependency of the bank is on the retail business. In retails business, their major income is from the deposits from like savings account, current account, etc. And that is why the NIM of HDFC bank compared to the other banks is on the lower side.

Capital Adequacy Ratio (CAR)

The CAR of HDFC Bank is 17.3%.

This number is very healthy when you compare it with the balance sheet size.

Gross NPA

The Gross NPA of HDFC Bank is 1.38%.

This a little disappointing number. The provisioning done by the bank for their bad assets has increased by 63%. But when u compare that with the parameters mentioned above, then that does not seem to be that big of a number. In last year same quarter, Gross NPA was 1.29%. So, definitely there has been an increase.

Net NPA

The Net NPA of HDFC bank is 0.41%

In last year same quarter, Net NPA was 0.42%. So, there is a decrease here in the YoY comparison. Recovery has happened of their bad loans.

Current Account-Savings Account Proportion (CASA)

The proportion of CASA over the deposits is of 41%.

This number has a direct relation with Net Interest Margin. Where the proportion of CASA is high, there the NIM is on the higher side.

Total Branches

HDFC Bank has a total of 4,963 branches.

Summary

• Overall, all the numbers of HDFC Bank are very healthy
• The main numbers are of the Net Profits, which are very good showing growth of almost 20.3% YoY
• HDFC Bank is the most favourite stock of any Mutual funds vs Direct Equity or FII’s because of its continued strong numbers of Total Income and Net Profit

Notes: –

• The numbers that are used are approximate and have been rounded for presentation purposes.
• No suggestions are been made as to whether this is a good or bad company/stock.
• No suggestions are also being made to go and immediately buy the stocks of this company or go invest in the stock market.