HDFC Bank- Q2FY22 Result Update & Key Takeaways

Q2FY22 Result:

• The Net Revenue of the Bank has increased sequentially by around 7.7% from Rs. 23,297.5 Cr. in Q1FY22 to Rs. 25,085.2 Cr. in Q2FY22. While on yearly basis, the revenue of the company by 14.7% from Rs. 21,868.8 Cr. in Q2FY21.
• The Operating Profit of the bank has shown decent growth but not so impressive from Rs. 15,137 Cr. in the previous quarter to Rs. 15,807.3 Cr. in the current quarter which amounts to growth of just 4.4% QoQ while YoY the Operating Profit of HDFC Bank has increased by 14.4% from Rs. 13,813.8 Cr. in Q2FY21.
• The Bank has registered a Net Profit of Rs. 8,834.3 Cr. in the second quarter of FY22 against Rs. 7,729.6 Cr. in the quarter ended 30^th June 2021, which amounted to a growth of 14.3% QoQ. Whereas, the growth in Net Profit yearly is around 17.6% from Rs. 7,513.1 Cr. in the Q2FY21. This double-digit growth in the Net Profit of the company on a quarterly as well as yearly basis shows a low amount of provisioning & slippages has reduced which is a good sign for the bank.
• Moving ahead to the Total Deposits of the Bank, then the bank has registered a growth of 13.2% YoY from Rs. 1,229,310 in the quarter ended 30^th September 2020 to Rs 1,406,343 Cr. in the quarter ended 30^th September 2021. Quarter-on-Quarter, the total deposits of the bank has increased by just 4.5% from Rs. 1,345,829 Cr. in the quarter ended 30^th June 2021.
• Further, the Total Advances of the Bank has shown a jump of 4.5% QoQ from Rs. 1,147,652 Cr. in Q1FY22 to Rs. 1,198,837 Cr. in Q2FY22. Whereas YoY, the total advances of the bank have grown by 15.5% from Rs. 1,038,335 Cr. in Q2FY21.
• The Balance Sheet Size of the Bank for Q2FY22 stood at Rs.1,844,845 Cr. in the Q2FY22 against Rs. 1,753,941 Cr. in Q1FY21 amounting to QoQ growth of 5.2%. The Balance Sheet Size of the bank has expanded by a significant 14.6% YoY from Rs. 1,609,428 Cr. in the Q2FY21.

Improvement in Ratios:

• The Core Net Interest Margin has remained stable at 4.1% in both the quarters i.e., Q1FY22 and Q2FY22.
• The Capital Adequacy Ratio has moved up to 20% in Q2FY22 against 19.1% in Q1FY22 depicting improvement in capital adequacy positions.
• Gross Non-Performings Assets (NPA) of HDFC Bank has gone down to 1.35% in Q2FY22 against 1.47% in Q1FY22 which is a very positive sign for the bank as asset quality has been improved.
• Net NPA was at 0.40% of Net Advances as of September 30, 2021.
• The Bank held floating provisions of Rs. 1,451 Cr. and contingent provisions of Rs. 7,756 Cr. as of September 30, 2021. Total Provisions were 163% of the Gross NPA.
• CASA ratio was 45% in the previous quarter i.e., Q1FY22 which has now stepped up to 47% in the quarter ended 30^th September 2021.
• The growth (YoY) in retail advances, Commerical Rural Banks (CRBs), and Corporate Advances stood at 12.9%, 27.8%, and 6% respectively
• The Bank has added 33 new branches, taking the total count of branches to 5,686 as of 30^th September 2021.

How is the Loan Mix of the Bank:

• In the last quarter, the Loan Mix of the Bank stood at 47% accountable to Retail Loans and 53% to Wholesale Loans.
• In the current quarter, Bank has described in detail the loan mix wherein Retail Loans stand at 40%. Also, Commercial Rural Banks (CRBs) shares in the total mix account for 34%. Here, the majority of the loan is also towards the Retail side.
• The Corporate Loans in the Loan Mix of the Bank stands at around 26% in the Quarter ended 30^th September 2021.
• The above discussion shows that the Bank has now again shifted its focus towards the Retail Loan side after grabbing some golden opportunities on the corporate side in between.

Performance of Subsidiaries:

i) HDFC Securities Limited:

• HDFC Securities Limited (HSL) is the leading retail broking firm in India and the bank owns a 96.2% stake in this company.
• HSL recorded growth of 42% YoY from Rs. 344.3 Cr. in Q2FY21 to Rs. 489.5 Cr. in Q2FY22.
• The Net Profit of HSL grew by 44% YoY to Rs. 239.6 Cr. in the quarter ended 30^th September 2021 against Rs. 165.8 Cr. in the quarter ended 30^th September 2020

ii) HDB Financial Services:

• HDB Financial Services (HDBFSL) is a Non-Banking Financial Company (NBFC) arm of HDFC Bank, where it holds a 95.1% stake as of September 30, 2021.
• The total loan book has increased by less than 1% YoY from Rs. 59,744 Cr. in Q2FY21 to Rs. 60,008 Cr. in Q2FY22.
• The Liquidity Coverage Ratio is at 157% which is considered to be healthy.
• The revenue of the subsidiary stood at Rs. 1,916.7 Cr. in the quarter ended 30^th September 2021 and has grown by 12.5% YoY.
• Pre-Provisioning Operating Profit of HDBFSL grown by 8.6% YoY to Rs. 885.9 Cr. in Q2FY22.
• The Provision and Contingencies of HDBFSL have come down to Rs. 633.9 Cr. in Q2FY22 from Rs. 929.8 Cr. in Q2FY21 and Rs. 889.6 Cr. in Q1FY22.
• The Net Profit of the subsidiary has moved out from Loss situation to profit of Rs. 191.7 Cr. in the Q2FY22.

What Should Investor Do:

The quarterly result of HDFC Bank for Q2FY22 shows improvement in the situation of the bank. The Company has again regained its focus on the retail loan side which is quite a positive sign for the bank. Bank has underperformed the benchmark index in the past few periods but the condition seems favorable to the bank and there could be some outperformance as well in the future. Hence, this Bank should be on the radar of the investor for the long term viewpoint. This discussion on HDFC Bank Stock is not a direct recommendation hence Do follow due diligence before making any investment decisions.