HDFC Bank, the leading private sector bank has announced its quarterly results for the quarter ended 31st December 2021 on Saturday 15th January 2022. Bank has posted a strong set of numbers on the board this quarter and has recorded a standalone net profit of Rs. 10,342 Cr. up by 18% YoY. So, let’s move forward and discuss the quarterly result of the bank and whether the HDFC Bank stock is a consistent compounder or not?
Q3FY22 Result Highlights (Standalone):
- HDFC Bank has earned Rs. 32,468 Cr. from the interest in the quarter ended 31st December 2021 which has grown by around 8% YoY from Rs. 30,079.7 Cr. in the same quarter of the previous financial year. While quarter on quarter this figure has gone up by around 3.6% from Rs. 31,353.4 Cr. in the quarter ended 30th September 2021.
- While the Interest expenditure of the bank has increased by around 2% YoY and 2.6% QoQ to Rs. 14,024.6 Cr. in Q3FY22. The interest expenditure of the bank was Rs. 13,762.1 Cr. and Rs. 13,669 Cr. in Q3FY21 and Q2FY22 respectively.
- The higher rise in interest earned over interest expended has led to the growth of Pre-Provisioning Operating Profit (PPOP) to Rs. 16,776 Cr. in the quarter ended 31st December 2021 up by 10.5% YoY from Rs. 15,186 Cr. in the quarter ended 31st December 2020. PPOP has gone up by 6.1% QoQ from Rs. 15,807 Cr. in the quarter ended 31st September 2021.
- The big positive for HDFC Bank in Q3FY22 is that its Provisioning has gone down by 23.7% sequentially from Rs. 3,924.7 Cr. in Q2FY22 to Rs. 2,994 Cr. in Q3FY22. Whereas, YoY this figure has come down by 12.3% from Rs. 3,414 Cr.
- The decent fall in the provisionings of the bank has led to the healthy growth of Profit Before Tax (PBT) which has zoomed up by 16% QoQ from Rs. 11,882.6 Cr. in Q2FY22 to Rs. 13,782 Cr. in Q3FY22. The PBT of the bank was Rs. 11,772 Cr. in the Q3FY21.
- With the help of a significant rise in the PBT, the bank has been able to cross the mark of Rs. 10,000 Cr. mark in this quarter. With the rise of 18.1% YoY, the bank’s net profit has increased from Rs. 8,758.3 Cr. in Q3FY21 to Rs. 10,342.2 Cr. in Q3FY22. Further, the net profit has increased by 17.1% QoQ from Rs. 8,834.3 Cr. in Q2FY22.
Balance Sheet Summary:
|Rs. Lakh Crore||Q3 FY22||Q3 FY21||YoY %||Q2 FY22||QoQ %|
|Balance sheet size||19.38||16.54||17%||18.44||5%|
|Credit to Deposit Ratio||87%||85%||85.20%|
- The size of the balance sheet has grown by 17.2% YoY to Rs. 19.38 Lakh Cr. in the quarter ended 31st December 2021 from Rs. 16.54 Lakh Cr. in the same quarter of the previous financial year.
- Total Advances of the Bank stood at Rs. 12.6 Lakh Cr. in Q3FY22 which has grown by 16.3% YoY and 5% QoQ. Total Advances was Rs. 10.8 Lakh and Rs. 11.98 Lakh Cr. in Q3FY21 and Q2FY22 respectively.
- The Total Deposits of HDFC Bank stood at Rs. 14.45 Lakh Cr. in Q3FY22 against Rs. 12.71 Lakh Cr. in Q3FY21 up by 14% YoY. Sequentially, the total deposits of the bank were Rs. 14.06 Lakh Cr. up by 3%.
- The Credit to Deposit Ratio of the bank in Q3FY22 is 87% which was 85% and 85.20% in Q3FY21 and Q2FY22 respectively.
- Key Parameters depicting bank’s Cautious Growth Strategy for strengthening its balance sheet :
- Consistently improving Reserves & Surplus
- Declining Credit to Deposit Ratio due to strong growth in Deposits vs Advances
- Average Liquidity Coverage Ratio Declined QoQ due to ease in Risk Aversion of Bank: LCR stable at 123% in Q3 FY22 vs 123% in Q2 FY22 vs 153% in Q2 FY21 vs 126% in Q1 FY22 (Bank’s LCR is well above the Permitted LCR Level of 100%)
- Capital Raise: April 17, 2021 Board Meeting: Bank is Planning to Raise Rs.50,000 Cr through Private Placement of Bonds over the next 12 months
|Rs. Lakh Cr||Q3 FY22||Q3 FY21||YoY %||Q2 FY22||QoQ %|
|Reserves & Surplus||2.29||1.95||18%||2.11||9%|
- The total Reserve & Surplus of the Bank as of 31st December 2021 is Rs. 2.29 Lakh Cr. up by 18% YoY and 9% QoQ from Rs. 1.95 Lakh Cr. and 2.11 Lakh Cr. in Q3FY21 and Q2FY22 respectively.
- The Borrowings of the bank have grown significantly by 59% YoY from Rs. 1.20 Lakh Cr. in Q3FY21 to Rs. 1.90 Lakh Cr. in Q3FY22.
Strengthening Balance sheet with New Capital Raise:
- On April 17, 2021, in the Board Meeting, it announced that Bank is Planning to Raise Rs.50,000 Cr through the Private Placement of Bonds over the next 12 months.
- On August 18, 2021, HDFC Bank’s $1-billion AT1 Bond Sale Subscribed 4.25 Times
- HDFC Bank’s $1-billion AT1 bond sale was the largest offshore sale of these papers by an Indian entity:
- The largest offshore sale of these papers by an Indian entity
- The sale received about $4.25 billion worth of bids, with global investors like GIC Singapore, Blackrock, Fidelity Investment, HSBC Global Asset Management, JP Morgan Asset Management, Lombard Odier, and Value Partners rushing to grab the papers
- Real money managers and hedge funds collectively bid for about 75% of the issue size. The rest came from private banks and others.
- The success of the HDFC Bank’s Bond issuance reflects the strong fundamentals of HDFC Bank and India’s long-term growth story
- The CASA Deposits account for 47.1% of the total deposit mix of the bank while the rest i.e., 52.9% is term deposit.
- There has been robust growth in CASA deposits and there is consistent growth in the same. The CASA Deposits which stood at 40.1% in June 2020 jumped to 43% in December 2020 then 45.5% in June 2021. The CASA Deposits were 46.8% in the September 2021 quarter.
- The Total Deposits of HDFC Bank stood at Rs. 14.46 Lakh Cr. in Q3FY22 against Rs. 12.71 Lakh Cr. in Q3FY21 up by 14% YoY. Sequentially, the total deposits of the bank were Rs. 14.06 Lakh Cr. up by 3%.
- Term Deposits stood at Rs. 7.64 Lakh Cr. in Q3FY22 against Rs. 7.26 Lakh Cr. in Q3FY21 and 7.48 Lakh Cr. in Q2FY22, up by 6% YoY and 2% QoQ.
- The CASA Deposits of the bank have gone up by 25% YoY from Rs. 5.46 Lakh Cr. in the quarter ended 31st December 2020 to Rs. 6.81 Lakh Cr. on 31st December 2021. Sequentially, this deposit has gone up by 4% from Rs. 6.57 Lakh Cr.
- As of now, the major focus of the bank is largely on the wholesale side where the wholesale loans account for 60% of the advance mix, while just 40% is towards retail loans. But the management has given the commentary that it will be focusing on retail loans and hence it will take some time to be seen in the advanced mix of the bank.
- The Total Retail Advances of the bank have decreased by 10% YoY from Rs. 5.62 Lakh Cr. in Q3FY21 to Rs. 5.04 Lakh Cr. in Q3FY22. Quarter on quarter, the retail advances grew by 5% QoQ from Rs. 4.79 Lakh Cr. in Q2FY22.
- Total Wholesale advances of the bank have shown a stellar growth of 45% YoY from Rs. 5.20 Lakh Cr. in Q3FY21 to Rs. 7.56 Lakh Cr. in Q3FY22. Bank has reported sequential growth of 5% in wholesale advances as well.
i) Advances Mix: Segment-wise:
- Commercial & Rural Bank (exclusive Agriculture), Corporate & Other Wholesale, and Personal Loans account for the major part of the advance mix in terms of segment of 30%, 26%, and 10% each.
- The big pie of advance mix- Commercial & Rural Bank (exclusive agriculture) has grown by 30% YoY and 7% QoQ to make a value of Rs. 3.84 Lakh Cr.
- Next to the Commercial & Rural Bank section is Corporate & Other Wholesale loans, which have grown by 8% YoY and 4% QoQ to Rs. 3.26 Lakh Cr.
- All other loans segments like Personal Loans, Auto, Home Loans, Payment Products, etc. have reported growth YoY as well as QoQ.
- Only the Two Wheelers segment reported a decrease of 11% YoY and 4% QoQ to Rs. 9,288 Cr. and now it accounts for around 1% of the total advance mix.
- The Net Interest Margin (NIM) of the bank is at 4.1% as of December 2021 which is constant since June 2021.
- The Cost to Income Ratio of the Bank is 37% which is not changed since the previous quarter of the same financial year.
- CASA Ratio is 47.1% as of December 2021 while Capital Adequacy Ratio is 19.5% in December 2021 which was 20% in September 2021 and 18.9% in the same quarter of the previous financial year.
- The Return on Average Assets has now come above 2% and is at 2.24% as of 31st December 2021. The same was 1.80% and 1.90% in June 2021 and September 2021 respectively.
- The Gross NPAs of the bank is at 1.26% and Net NPAs are at 0.37% as of December 2021. The Provision Coverage Ratio (PCR) ratio is 71% in the same period.
- The NPA levels got a spike in June 2021 to 1.47 (Gross NPA) and 0.48% (Net NPA), post them it has gone down consistently.
- The big positive for the bank here is that it has reported a drastic downfall in its provisions, Gross NPAs, and Net NPAs as well.
- Currently, the HDFC Stock is trading at a PE Ratio of 25.03 which is almost in line or moreover in discount with the Median PE of 1-Years (25.81), 3-Years (26.04), 5-Years (27.49), and 10-Years (25.77).
What Should Shareholders Do?
HDFC Bank has posted a strong quarterly result for the quarter ended 31st December 2021 in all aspects. The stock has not performed up to the expectation in the recent past but one cannot ignore its consistency in terms of profitability view, asset management, and all other aspects. Hence one should closely watch this counter and should keep this stock on their radar.