For a country like India, the penetration of banking services into deeper areas of the country presents a large growth opportunity for such well-placed private banks. The need for more penetration is evident from the fact that the RBI has initiated the process of giving banking licences to new entrants and has recently received the expression of interest in this regards from various corporates and NBFCs. This only goes to show the growth potential of the sector as a whole.
In this scenario, HDFC bank is well placed and is enhancing its penetration into semi-urban and rural areas already. HDFC bank has 26 to 36% branches in semi-urban areas and 8 to 17% branches in rural areas in the past three years. Overall, the bank presently has 3119 branches, 11088 ATMs, spread over 1891 cities and towns as of Jun 2013. It is equally placed in retail & wholesale banking having a mix in the ratio of 54:46.
Let us look at the financials of the bank which are as follows :
| 2013 | 2012 | 2011 | 2010 | 2009 | CAGR% | |
| Net Interest Income (in Cr) | 15811.1 | 12884.6 | 10542 | 8386 | 7420 | 20.82 |
| Net Profit | 6726.3 | 5167.1 | 3926 | 2948 | 2245 | 31.56 |
| Net Interest Margin% | 4.47 | 4.43 | 4.44 | N.A | N.A | |
| ROE% | 18.82 | 17.54 | 15.75 | 14 | 15.78 | |
| ROA% | 1.9 | 1.77 | 1.58 | N.A | N.A | |
| Balance Sheet size | 400,331.89 | 337,909.51 | 277,352.60 | 222,458.56 | 183,270.77 | 21.57 |
| Shareholder Equity | 35738 | 29455 | 24914 | 21064 | 14226 | 25.90 |
CMP at the time of posting was Rs. 644.70.
Gross NPA for the last three years stand as follows :
2013 :- 0.97%
2012 :- 1.02%
2011 :- 1.05%
HDFC bank is the only large sized bank with strong asset quality as reflected by its ROA and Gross NPA. This in-turn reflects that the bank has good control over its NPL (Non-Performing Loans) leading to increase in profits YoY.
As per the results declared in Q1 2013
HDFC bank has registered NIM of 4.6%
CASA deposits stand at 44.7%
Advances and deposits have grown at 21.2% and 17.8% at Rs. 2603bn and Rs.3033bn respectively.
Net profit increased by 30.1% YoY to Rs.1843.9Cr.
Gross NPA is 1%
Healthy CASA deposits are helping the bank to keep its NIM at good constant levels in variable interest rate and cost deposit scenario well above the largest bank in India.
In our present economic environment with slow growth and high inflation, HDFC bank, by maintaining its levels promises to maintain its capability for good business hence can be a good stock investment option at the correct price levels.
