Industry Overview : Banking is a Good industry where you can earn money. But for that you need to do right things. The reason is Banking is not Manufacturing where you buy Raw material and process it and then manufacture something else. Banking is simply the process to earn money from the money you have. If you do it right, you are winner. The most important thing in this is pretty simple. Make successful Formula and keep repeating it until you succeed. In the language of Saurabh Mukherjee, Ambit Capital, The word that is repeatedly mentioned in the context of HDFCBANK is execution. I am sorry for directly coming on the company analysis but when the Company is HDFCBANK then its difficult to talk much about industry.
Company overview : HDFC BANK Is one of the leading banks in India. If the employee, HR or whatever you may call it, is the Asset for Bank,then HDFC BANK is one of the best in it, Just like Axis and ICICI bank. But the Best thing is what they did with it. They develop one if the best bank. It is that bank which come up with first online banking software for Centralised Banking. It is the HDFC BANK which realise the importance of CASA deposit and Started giving Check books facilities to Customers of co-operative Banks its early Days. But the best thing as per me what makes them ahead of others is giving loans only BlueChip customer i.e. Big businesses at one of the lowest rate.
There are some concerns also with HDFCBANK. As from day one the strategy of HDFC BANK revolve around superior technology and it was the bank which come up with mobile banking, Axis Bank and ICICI bank are catching up. Axis pingpay or ICICI pocket are good applications. Recent Developments in banking and technology like UPI, Makes it easy for all the customers to transact. Axis and ICICI are looking better placed. Though as HDFCBANK is big name in POS terminals (Also known as Card swip machine) and credit card business. The bank also loosing its CASA Leader Slot. The retail deposit in Last 15 years, HDFC BANK registered 30% CAGR and 80% of its total deposit are retail.
But the Bank is still receiving good response from Investors. But the subsidiaries and The fee payment from HDFC is helping them. HDFCBANK owm 100% Stake in HDFC securities and also holding Stake in one ARC which helps it to remove stressed assets. The secret behind low NPA and having zero stressed assets portfolio. In FY04 the bank make a deal with HDFC to become distributor of the home loan for fee of 0.7% of loan, with the right to Buyback 70% of the loan originate by it.
Most important thing about bank is when there was difficult time for big banks like ICICI, it hardly affect. Now as the worst is looking behind, HDFC is looking better then ICICI BANK..
Financials and Ratios
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Loan Book 159982.67 195420.03 239720.64 303000.27 365495.0 3 464593.96
Net Interest Margin 3.80 3.63 3.94 3.75 3.79 3.89
ROE 15.47 17.26 18.57 19.50 16.47 16.91
ROA 1.41 1.52 1.68 1.72 1.73 1.73
Efficiency Ratio 45.13 38.03 38.02 36.53 36.84 36.7
Tier 1 Capital 12 12 11 12 14 13
Net NPA to loan book 0 0 0 0 0 0
CASA Ratio 52.69 48.39 47.43 44.81 44.03 43.24
Book value 545.53 127.52 152.20 181.23 247.39 287.47
EPS 16.81 21.91 28.18 35.21 41.67 48.26
Dividend per Shared 16.50 4.30 5.5 6.85 8 9.5
Future Prospects : India Know HDFC bank. Many people have faith on them. Having parent like Housing Development Finance Corporation is important as the business of Banking always need Capital infusion. Future clarity and high Return on Asset is important which HDFC bank is keeping very easily with maintaining lowest possible NPA in industry. Continuous growth rate of 20% is important but when MD and CEO, Aaditya Puri mentioned that 30% is also possible then it is clear that Future is looking Good.
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