📢 5 STEPS TOWARDS WEALTH 🚀 The Indian Stock Market Way
HDFCBANK: CMP: 1766 | Sales LONG TERM: 20% | SALES Q2_FY25: 13 %
### About HDFC Bank
It is India's largest private sector bank by assets and world's 13th largest bank by market capitalization. The bank has a strong focus on retail banking, corporate banking, and treasury operations. It is the third largest company by market capitalization of 12.3 lakh Cr on the Indian stock exchanges. It is also the fifteenth largest employer in India with nearly 2 .13 Lakh employees. HDFC Bank was incorporated in 1994 as a subsidiary of the Housing Development Finance Corporation. HDFC Bank merged with Times Bank in February 2000. Times Bank was established by Bennett, Coleman and Co. Ltd., commonly known as The Times Group, India's largest media conglomerate. In April 2022, HDFC Bank announced merger with HDFC Limited which was completed in recent July_fy24. The recent merger with HDFC Limited has significantly enhanced its scale and market presence.
### Industry Overview
The Indian banking sector has been experiencing robust growth, driven by increasing demand for financial services, digital transformation, and government initiatives promoting financial inclusion. However, the sector also faces challenges such as rising NPAs, regulatory changes, and competition from fintech companies.
### Historical Performance:
*Fy_2004*: Advances of 18k Cr, Sales of 3k Cr and Profit of 500 Cr. Price was 37 (adjusted with split).
*Fy_2014*: In 10 Years Advances reached 3 Lakh Cr, Sales crossed the benchmark 51k Cr and Profits of 9k Cr. Price rallied 400 which is 10X (adjusted with split).
*Fy_2024*: This was the year of the great Merger helping Advances reach 25.7 Lakh Cr, Sales reached 4 Lakh Cr and Profits crossed the benchmark of 50k Cr reaching 64k Cr. India’s 3rd company to reach the profits of > 50K cr. Price rallied 1700 which is 4X in 10 Years and 40X in 20 years along with high and consistent dividends.
One of the best in the Indian banking Industry. This bank was not even in the TOP 15 companies 2 decades back and today is No#3 as per the Market Cap & 3rd as per profitability. Very high growth, best margin, and least NPA maintained by HDFC Bank throughout history. Investment of 1 Lakh done 24 years back is today more than 3.5 Crore along with consistent dividends which is 3x to invested amount.
#### HDFC Bank Q2 FY25 Results: Strong Growth in Advances & Profit! 💼
Key Strengths:
🏢 Over 7,000 branches across India.
💳 Focused on retail loans and growing demand for corporate lending.
💻 Leading the way in digital banking innovations, enhancing operational efficiency.
🏡 The merger with HDFC Ltd. strengthens its mortgage portfolio and creates new cross-selling opportunities.
🏦 Industry Overview:
The Indian Banking Sector has proven resilient amid global economic uncertainties, benefiting from strong domestic demand, regulatory oversight, and advances in technology.
Credit Growth:
Expected 15-16% growth in FY25, driven by strong retail demand, housing loans, and corporate lending.
📲 Digital adoption is enhancing banking outreach, particularly in rural and semi-urban areas.
Regulatory Support:
The RBI has played a key role in stabilizing liquidity and managing inflation through continuous regulatory measures.
📈 Policies such as priority sector lending and the Insolvency and Bankruptcy Code (IBC) have improved asset quality across the sector.
Challenges:
🌍 Inflationary pressures, geopolitical concerns, and fluctuating interest rates pose risks, but India’s robust economic growth is expected to mitigate these challenges.
📊 Detailed Financial Ratios:
Return on Assets (ROA):
1.96% in Q2 FY25, compared to 1.93% in Q2 FY24.
📈 Indicates the bank’s efficiency in using its assets to generate profit.
Return on Equity (ROE):
17.6% in Q2 FY25, higher than 16.9% in Q2 FY24.
💰 Demonstrates improved profitability and efficiency in delivering returns for shareholders.
Net Interest Margin (NIM):
4.2% for Q2 FY25, stable compared to 4.1% in Q2 FY24.
🔍 Reflects the bank’s ability to manage lending and borrowing rates efficiently.
Capital Adequacy Ratio (CAR):
18.4% in Q2 FY25 (vs. 18.2% in Q2 FY24).
✅ Ensures the bank remains well-capitalized, maintaining financial stability above regulatory requirements.
Cost-to-Income Ratio:
38.9% in Q2 FY25, down from 40.1% in Q2 FY24.
🛠 Shows operational efficiency, benefiting from digitization and improved cost management.
Gross NPA (Non-Performing Assets):
1.12% in Q2 FY25, compared to 1.17% in Q2 FY24.
📉 A decrease in NPAs highlights improving loan quality and effective recovery mechanisms.
Net NPA:
0.29% in Q2 FY25, down from 0.31% in Q2 FY24.
✅ Reflects strong management of the bank's bad loans.
Provision Coverage Ratio (PCR):
83.7%, demonstrating the bank’s strong provisioning for potential loan losses, ensuring financial stability.
📈 Advances Data:
Total Advances:
₹ 18,90,000 crore in Q2 FY25, compared to ₹ 15,80,000 crore in Q2 FY24, reflecting a +19.5% growth.
🏦 This increase in advances was driven by demand across both retail and corporate segments.
Retail Advances:
Grew by +17.9%, contributing 55% of the total loan book.
🛍 Growth was primarily driven by personal loans, auto loans, and housing finance.
Corporate & Wholesale Advances:
Grew by +20.2%, supported by large enterprises seeking working capital and expansion financing.
📊 Peer Comparison:
ICICI Bank:
💼 Net Profit: ₹ 10,000 crore (Q2 FY25), with slower growth compared to HDFC Bank.
📊 NIM: 4.0%, slightly lower than HDFC Bank, indicating a difference in interest margins.
Axis Bank:
📈 Net Profit: ₹ 6,300 crore, with 13.1% growth, lagging behind HDFC Bank.
📉 Gross NPA: 1.98%, higher than HDFC Bank, indicating weaker asset quality.
Kotak Mahindra Bank:
💰 Net Profit: ₹ 4,700 crore, showing moderate growth.
✅ CAR: 18.7%, similar to HDFC Bank, though Kotak’s advances growth is slower.
🔮 Future Outlook for HDFC Bank:
Merger Impact:
The integration with HDFC Ltd. will create a diversified product portfolio, especially in housing loans, contributing to long-term growth opportunities.
Digital Transformation:
Continued investments in digital banking solutions will drive customer experience, operational efficiency, and expand the bank’s customer base.
Focus Areas:
Retail Credit: Strong growth expected in personal loans, auto loans, and housing finance.
Corporate Credit: Demand for working capital and expansion loans is anticipated to stay high.
Strategic Expansion:
The bank plans to expand in semi-urban and rural areas, tapping into new markets for deposits and credit growth.
📌 Summary of Key Metrics from Q2 FY25:
Total Consolidated Income:
₹ 1,75,190 crore in Q2 FY25, compared to ₹ 1,52,056 crore in Q2 FY24, reflecting a growth of +15.21%.
Net Profit:
₹ 13,270 crore in Q2 FY25, compared to ₹ 11,760 crore in Q2 FY24, showing an increase of +12.9%.
Gross NPA:
1.12% in Q2 FY25, down from 1.17% in Q2 FY24, indicating improvement in asset quality.
Net NPA:
0.29% in Q2 FY25, compared to 0.31% in Q2 FY24, reflecting a positive reduction in bad assets.
Advances:
₹ 18,90,000 crore in Q2 FY25, compared to ₹ 15,80,000 crore in Q2 FY24, showing strong growth of +19.5%.
Return on Assets (ROA):
1.96% in Q2 FY25, up from 1.93% in Q2 FY24, indicating improved asset efficiency.
Return on Equity (ROE):
17.6% in Q2 FY25, compared to 16.9% in Q2 FY24, reflecting a rise in shareholder returns.
Net Interest Margin (NIM):
4.2% in Q2 FY25, compared to 4.1% in Q2 FY24, indicating better profitability from lending operations.
Cost-to-Income Ratio:
38.9% in Q2 FY25, down from 40.1% in Q2 FY24, showing improved cost management and operational efficiency.
Capital Adequacy Ratio (CAR):
18.4% in Q2 FY25, compared to 18.2% in Q2 FY24, indicating a strong capital buffer above regulatory requirements.
### Action
We may see FY '25, probably grow slower than the system. FY '26, we may be at or around the system growth rate. FY '27, we should be faster than the system growth rate. Hence this year income growth of 15% while profits may grow by 10% Could be seen. Profits may increase more once the interest rate cycle starts on a downtrend which is expected from next few months. New buying again can be done in the whole range of 1330 to 1196 while the target of 1944 should be seen this year itself.
### Future Outlook
HDFC Bank is well-positioned for future growth, supported by:
- Strong capital adequacy (19.3% CAR).
- Healthy asset quality management.
- Continuous digital innovation and customer-centric approach.
- Expanding retail and corporate banking segments.
- We may see HDFCBank reach 100 Lakh cr of advances, 15 Lakh Cr revenue and Profits of more than 2.5 Lakh Cr till fy_35. Overall multiyear rally along with string and consistent profits could be seen.
### SHP
HDFC was the Promoter with 26% which was cancelled and hence now HDFCBank is a promoter less company with MF & Insurance Companies holding around 27% stake along with FPI holding 33%.
### Disclosure
We are not tip providers, yes we do have HDFC Bank in our own portfolio. Should not treat this document as a recommendation, should check the data on your own before buying/selling decisions.
