HDFC Bank - We Understand Your World - Stock Analysis & Valuation

• PAT: 191Cr ← 240Cr
• #branches: 215 / #Cities: 147
---------- HDB Financial Services (HDBFSL) - NBFC [95% holding]
• Rev: 2.2KCr ← 1.9KCr YUP 15%

• PAT: 471Cr ← 192Cr
• Loan Book(T): 63KCr
• S3 Loans: 4.9%
• CAR: 20.8% / T1 CAR: 16%
• #branches: 1.4K / #cities: 1K
Link to NR
YUP - YoY Growth
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Ayshi 503 October 16, 2022, 8:11am
Highlights of the Earnings Call that took place yesterday:
MANAGEMENT COMMENTARY
Shrinivasan Vaidyanathan – CFO
• Global market conditions are improving

• RBI raised the policy rate by 100 bps in the quarter taking the repo rate to 5.9%
• RBI has raised rates by 190 bps since May 2022. The stance is unchanged.
• We estimate GDP growth will be around 7% for FY23
• On distribution expansion, we added 151 branches during the quarter, and 500 more branches are in the
pipeline to be opened in this Financial Year
• 2960 branches now offer gold loan processing – and increase of 900 branches in the current quarter.
• We expanded by 145 locations in the quarter for Wealth Management.
• Our people have acquired 2.9 million new liability relationships – a healthy growth of 11% QoQ.
• Retail advances growth was robust. Retail constitutes 83% of total deposits. Retail deposits have been the
anchor of our deposit growth.
• Commercial and Rural book grew
• CASA book was at 7.59 lakh crore
• Term Deposits grew by 22% YoY at 9.13 lakh crore.
• Advances side was at 14.79 lakh crore – grew by 6.1% QoQ
• We have issued 1.2 million cards in the Quarter – reaching 16.3 million total cards – we closed 2.4 million
cards during the quarter during inactivity – as per RBI circular.
• Card spends grew by 9% QoQ.
• Objective is to reach 2 lakh villages. We are at 1.42 lakh villages.
• Technology and Digital transformation is yet in momentum.
• Vyapaar app was formally launched for instant digital merchant onboarding
• Platform is adding more than 60,000 merchants every month
• Over 1.6 million businesses are on this SmartApp Platform.
• In Q2, there were ~30 million unique customers a month on the website on average.
• Balance Sheet remains resilient.
• NIM at 18000 crore. NIM = 4.1%.
• CET 1 is at 16.3%
• PPOP grew by 16.6% YoY and 5.8% QoQ – at 17, 393 crore
• PPOP is 5.37 times of total provisions
• GNPA was at 1.23%
o Core GNPA was at 1.04%
o NNPA was at 33 bps
• Slippage ratio is at 36 bps – 5700 crore
• Recoveries and Upgrade = 2500 crore
• 6499 branches, 18688 ATMs
• C-I Ratio was at 39.2%
• Write-offs in the quarter were ~3000 crore – 22 bps
• Restructuring under the RBI Resolution Framework stands at 53 bps. 7851 crore.
o Not restructured – 9bps
• Total Provisions = 3200 crore
• PCR was at 73%
• General provisions were at 6800 crore
• Total Credit Cost Ratio net of recoveries was 64 bps – compared to 103 bps last year
Q&A
Mahrukh Adajania - Nuvama
Q: On liability growth going ahead. This quarter was impressive with strong retail growth. Closer to the
merger, how will the liability strategy change? Would it be focused on wholesale borrowings and deposits?
What kind of borrowings would these be?
• Focus is on execution
• Relationship based growth continues to remain the focus
• We are building momentum in retail
• Branch network is there – and the pipeline for the next 3 years continues to remain the same
• Currently, it is about harvesting and utilization of branches
• 50% of those branches are shifting from 1 vintage bucket to another vintage bucket
• There are other market borrowings that opportunistically happen – and that will continue as per the market
Q: Any outlook on margins on a standalone basis 2-3 quarters down the line? As we know, Merger will put
pressure on margins.
• Think about what the margin means -

• We have typically operated between 3.14 and 4.45%
• In this range, the mix of products is very important – retail mix between 53-55% and the wholesale mix
will be 40-45%
o Overall, in the last 4-5 years, it has switched.
o Retail is now 45% - wholesale is at 55%
• And now you can see a pickup in the margin as rate cycle has gone up as the pass on is laggard.
• 45% is fixed rate – the rest is floating
• You have seen pickup in the margins due to a switch in the mix
• You will continue to see the mix change
• And now momentum is picking up
• Economy is 60% consumption led
• We have had need in the retail.
• Last quarter retail book advances growth was at 5% and was similar in the June quarter
• As long as you can see that move up, you will also see the mix moving – this gives opportunity for the
margin to move up
• These are the 2 aspects to think about when projecting margins
Suresh Ganpathy – Macquarie
Q: On deposit rate…RBI has hiked rates by 190 bps. None of the banks have hikes their rates even by half
the amount – they have only gone up by 50-60bps in the last 6 months. There is a significant gap in terms of
monetary policy transmission. What is the outlook on deposit rate? How do you see that panning out?
And the 2nd question is on branch growth? You have a target to 1500 – 2000 branches every year. Do you
think 2nd half is going to very strong?
And what about NCLT guidance to conduct a shareholders meeting? Does this mean the pace of approvals
are better than expectation?
• CASA is a different aspect – the way we earn time deposits – we think about public and private sector
peers
• The way we approach deposits – we have to be competitively priced
• We are in line with the private sector banks – not at an advantage or disadvantage. It is only about the
execution capabilities.
• It is not a sales-based process but a relationship based one.
• If you think about public sector peers, there are certain points of the curve where we are higher – typically
in the medium to long term; and in the short term, in some places we are lower. Not by our design – our
term deposit yield curve is upward sloping.
o That is how we monitor that.
• There is no formula for repo pricing or other kind of t-bill or g-sec kind of pricing.
• It is about the demand – and that’s how we approach it
Branches:
• We have been a bit slow in the first half and it is typically like that.
• We do see a ramp up happen in the 2nd half of the year – in terms of branches
• It is medium-long term goal – but as you open a bank – you track the New Account Value
• We have more than 500 branches in the pipeline in various stages of readiness and completion
NCLT:
• Are we on the timeline? Yes. Maybe there is a scope for a few months early.
• NCLT goes to various agencies in the country –and that is a long-drawn process – after shareholder
meeting
• There are callings for comments, hearing in newspapers, etc.
• After shareholders’ approval it will take 7-8 months – after which we will get approval.
• Continue to be in dialogue with RBI for exemption.
Kunal Shah – ICICI Securities
Q: W.r.t payment products growth, it is lagging in growth compared to the industry but we are not seeing
any loss in market share with respect to spend. Is it more in terms of the behavior of the transactors vs
revolvers - or is it other payment product contribution that is leading to near 2% sequential growth?
• On spend, we see good amount of traction coming in.

• And it is transactor-driven – and the customers who are spending have very good liquidity.
• If you look at our card customers liability balances it is close to 5 times the loan balance of these
customers – total average
• We see normal amount of liquidity
• Revolver rates have not picked up and are yet at 70-75% of pre-covid level
• In 1-2 months, we will see revolvers coming in
• We see the people who have a tendency to revolve over a larger period of time have actually come down.
• We do see something – but haven’t seen credit card customers revolvers come back up after covid.
Q: With respect to commercial banking, there is improvement as far as retail is considered. But commercial
ex of agri is yet stable. Given inflation impact in industry, what is your outlook on commercial banking?
And what incremental measures are we taking in such a global slowdown?
• The strength of the commercial banking – especially MSME segment – we see extremely robust growth
here.
• There are origination models, management models, relationship models of the customers
• Lending is one of the value propositions.
• In may we presented, the self-funding ratio, that is the liabilities generated by this segment through their
own cash management account, through their promoters’ account and through their employees’ accounts –
more that 80-85% self-funded. This ensures good model for credit management.
• More than 85-90% is secondary collateral – which is very important. Additional with primary collateral.
There is much more skin for the bank and the business to work together.
• Even during covid, this sector was quite unscathed and quite good.
• We see strong cashflows coming in.
• We consider these types of loans on a case to case basis.
Rahul Jain – Goldman Sachs
Q: Can we understand the headcount size? We added about 9000 in this quarter. How many more do we
need to hire for this year? We may have preempted hiring for branch growth and expansion. For the next
couple of years, how do we think about headcount?
• Some level of hiring will happen for new branches and has happened. This will continue as soon as the
locations is signed.
• The broader question you asked, yes with digital efforts we are putting through – we are seeing a lot of
traction on the digital front – so thereby, we don’t need to add at that rate.
• But we may get a few subsidiaries on board – and that may impact the total headcount number.
• We will ensure high end relationship management.
• There are about 45,000 – as reported in March – in the salesforce that is there.
Q: On credit deposit that has expanded in this quarter. Incremental share in deposits has increased in the
past year or so. How can we think about the combination of credit and deposit growth? Can we sustain this
incremental market share gains, because the system is rationing up efforts of deposit mobilization rates by
offering higher rates, etc.? Or will we have to up the game there?
• In terms of the CD ratio, or the deposit and advances growth – I know we are in a particular interest rate
cycle – but if you have to go back to 5-10 years in the past – and see what has happened then – through the
interest rate cycle over a period of time – 2.5-3 times is the kind of rate of growth.
Abhishek Murarka – HSBC
Q: Going back to the NIMs conversation, you mentioned that the mix is where it is and that is why you are
the lower end of the range, the rates that are going up, so suffice to figure for this that as deposit rates start
catching up, we should get back to As deposit rates catch up – will we use 4% nims or is that not the case?
Or will you be able to maintain the existing spread that you have got?
• If you see the rates that have changed – there is more to come in the November and March quarter
• As rates go up, there is continuation of this effect
• It is also about deposit mix funding – we have an opportunity to increase our penetration in time deposits.
• Time deposits grew by 72% - we only have 14-15% of our customers we have penetrated on time deposits
• There is an enormous opportunity here. Depends on the mix and the need and how long the rate cycle
goes.
Q: With the same mix, you expect deals to be going up more…and deposit growing strategy will not be
completely rate dependent – and to that extent you can gain on spreads – is that a correct understanding?
• Till the extent that we need the rate on advances and deposits it is upcoming
• It depends on market circumstances
Q: On HDB, GNPA on a sequential basis they are pretty flat. What’s happening there in terms of asset
quality? What’s the restructured book there? How much provisions are you carrying on that?
• The HDB asset quality trajectory is improving and will continue

• Provision Coverage on secured book is 46% and on unsecured book PCR is 92% - and on the overall loan
book – 75% of the total loan book is secured loan book – so it’s a good type of book
• And the customer segment was significantly impacted during covid as part of the NPA – as economy
became stronger, there is quite an improvement – but there is more to go in that.
Q: Restructured book in HDB?
• There is some management overlay that we do have and continues to be there.

• But restructured book we haven’t published yet.
Q: We still have trading losses – you alluded to corporate bonds attributing to that. What is the reason
behind that?
• If you look at the corporate bond book – not the T-bills – the certificates that are predominantly PSL
driven certificates which are there – the base rate that determines the valuation of the bonds and the PTC
published by Suvidhaa and other associations…the base rate is the g-sec rate
• The 6-month rate is up 77bps in the quarter – the frontend part of the curve is up but long-term bonds’ rate
is down by 9 bps.
• If you look at the disbursement of the bond book, it is a pretty good normal distribution around that 2-2.5
years range bucket
• G-sec rate on the frontend of the curve is one of the elements of valuation
• The 2nd aspect is the bond spreads. That have come down.
• Bond spreads in the front-end are down 6bps on a 6-month basis, 21 bps down on a YoY basis, 11 bps
down 2-year basis.
• The bond spread is another element of the valuation.
• Until the bond spreads grow past that level – they can’t drive Gsec for corporate bond book
• The co-efficient portfolio at normal distribution is therefore around the 2-year mark.
Shashank Kumar – Sunidhi Securities
Q: On credit card business. What will be the impact of UPI on Rupay Credit card, transaction value due to
MDR differences, or it will be settled down 2.2-2.4%? You can give some colour…
• These are variable cases

• We’ll have to wait and see how the market reacts
• We are predominant in the Mastercard issuer – and Rupay cards is a small base in our credit cards
• The growth in UPI and the pricing of the same, we’ll have to wait and see
• Currently, what we have through Mastercard and Visa, the transaction size is very good for us.
Q: On the asset quality size, what is the slippages, write-off and recover?
• Slippages in Q2FY23 were 36 bps or 5700 crore

• Recoveries and uograde were 19 bps or 2500 crore
• Write-offs about 22bps 3000 crore
Saurav – JP Morgan
Q: On corporate banking fees…on 9% QoQ growth…where it is coming from? Are you displacing some
public sector banks or large corporates?
The consequence of that build-up, the NIMs should come up – but at the RoA level is it a 2% business?
How do you think about it?
• On RoA, all our pricing decisions as well as business model decisions based on the returns it provides –
not the NIMs it provides.
• It is quite good relationship-based businesses in the wholesale
• We have quite good traction
• Large contributors have been telecom companies, energy companies, PSUs – we will get returns in line
with the bank’s overall returns
• When the price is not right, we let go of the volumes, we let go of the transaction, not let go of the
customer as they are good relationships. Keep good relations, if that particular transaction doesn’t work, it
doesn’t work.
Q: In an interview, you said that half the digital transformations is over and the IT cost will peak out – and
you will reach about 21 million merchants from 3 million at play. How should you think about this
impacting your Opex? Or you chose to reinvest any gains? On credit cost or your NIM on Opex side, how
do you think about this?
• 1 aspect is in terms of digitalization itself. The context of that was that the merchant Vyapaar app that we
formally launched – and has took off very well
• We get quite a good traction. We get in almost 60,000 merchants per month in the recent month. And more
than 1.6 million signed up under the Smart Vyapaar app.
• It is not just a payment product relationship. It is also a liability relationship, asset relationship in addition
to getting the payment relationship.
• And there is a lot of value for the merchants to do business with us.
• The 2nd part of what you asked, our cost to income before covid was about 39.5 and through covid, the
retail kind of transaction, we came down to 36-37 – and now we are back to 38-39.
• It can go to 40-41% QoQ. You can imagine on the yearly basis that we will be at 40 as we make those
investment to come.
• As we see…denying credit, as the average credit cost you see in this quarter…80-90bps…last quarter
90-95bps…so there is an opportunity to become lean there and get the maturity cycle up, from branch
maturity cycle – which is18-24 months - to people maturity cycle – which is 6-9 months – So the thought of
what the investments go do…This contributes to the overall return framework
Q: These 20 million merchants is just HDFC bank and doesn’t include your fintech partnerships?
• That is right. Merchant relationship is with the bank.
Manish Shukla – Axis Capital
Q: Can you remind us the key dispensations and relaxations you sought from RBI for the merger? And
realistically, by when will you get visibility on the same?
• What I said in May stands true even today.

• SLR, CLR, side pass will continue to focus on greater and faster credit growth supported by us – That is
something what we are discussing
• In terms of the priority sector lending which kicks in 12 months after the effective date – so September
2023 will be in November 2024 is where it’ll come
• We wish to organically originate
• We have moved to 1.42 lakh villages now – we were only at 1 lakh villages if you go back 12-15 months
ago – come here and we wish to tap to 2 lakh villages – and that is how we go about building this.
• In terms of opening up and reaching 3000 mark on branches originating gold loan – we want to do around
5000 branches that originate gold loans – again that is a part of that initiative to ensure that we take the right
kind of quality on the priority sector lending
• These are the action plans that comes for organic – but we organically do this.
• We will continue to have conversations about this with the regulators.
Q: By the time you seek shareholder approval, towards end of November, are you expecting any visibility
on any of these?
• There is no particular timeframe for this

• These conversations are private so no details about the same.
• The verdict or model is not dependent on that – it is good to have but not necessary
Q: On liabilities, once you acquire a large mortgage book from HDFC, potentially you can fund it using
long term affordable housing bonds, so what are your thoughts around the same? How many of those bonds
you can issue? Does that mean in the interim your LDRs as a merged entity would be higher than what you
have historically seen for HDFC Bank standalone?
• That is part of the equation and we would consider opportunities to do that.

• From a cost point of view, we are indifferent – as the assets on the other side are floating rate assets, priced
off the market benchmark, and there are hedging instruments in the market through which interest rate risks
can be managed.
• At the same time, liquidity maturity is also managed through these affordable bonds – and they provide us
and offset from CLR and SLR subject to certain criteria.
X.
Ps. There have been certain omissions/paraphrasing in these notes. It is not a transcript word-for-word.
32 Likes
s.j.saha 505 November 11, 2022, 9:05am
1 Like
Investor_No_1 506 November 11, 2022, 12:36pm
Few months back remember reading what seemed somewhat opposite of this news…Everywhere it was
mentioned that MF/FII would sell HDFC bank as post merger the ratio that they hold would double…now
this news seem to say that weightage of HDFC bank would double and hence room to add more for FII…
not sure what it means for Mutual Funds…
Merged HDFC entity could have double the weight in MSCI,

says Macquarie
At present, HDFC is part of MSCI indices, while HDFC Bank is not
2 Likes
sudtintin 507 December 19, 2022, 10:20am
Chief Executive Officer and Managing Director of HDFC Bank
6 Likes
Ayshi 508 December 19, 2022, 11:32am

HDFC Bank targets issuing one million credit cards a month post RBI ban lift.
https://www.bqprime.com/business/india-s-hdfc-targets-issuing-one-million-credit-cards-a-month
s.j.saha 510 January 4, 2023, 1:16pm
Dec’22 end Update
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5 Likes
s.j.saha 511 January 14, 2023, 11:12am
Dec’22 Quarterly Results
dearbusinessman.com
This domain may be for sale!
bc3a338a-3fc4-4b2f-b575-fd7af93bb57a.pdf
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24333e5f-3df9-47a2-89a9-98a731be67f7.pdf
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ranvir 512 January 14, 2023, 12:29pm
One highlight for me is the aggressive branch expansion at 7183 branches vs 5779 branches in Dec 21.
Second highlight is robust 20 pc growth in Deposits. Going forward, deposit growth is one parameter which
is going to differentiate between the men and the boys in an environment where the Systemic deposit
growth is lagging credit growth at around 8-10 pc. The third highlight is retail loan growth coming back to
20 pc levels. This was a cause of concern for analysts.
Once the Bank is able to roll out its new Tech Stack / Tech Infra, the stock may be in for some re-rating.
Disc : invested, biased.
4 Likes
nav_1996 513 January 14, 2023, 12:38pm
That is more than 20% branches. Wow. Branches take time to mature and become fully profitable. Probably
we are seeing early green shoots of few years of decent growth on a very large base.
Vikky9995 514 January 14, 2023, 3:27pm
All good and great but the retail loans are only 39% of the book and the bank is able to make 18% ROE.
How is this possible? Which large corporates that paying that much huge interest to the bank? Seems the
bank is getting into wholesale and other very big large lending deals. Otherwise it’s almost impossible to
have this kind of growth. The bank just added a kotak bank interns of deposit growth just in an year… how
is this even possible in such competitive market. I’m not implying any wrongdoing but these numbers are
too good to be comfortable.
4 Likes
nirvana_laha 515 January 14, 2023, 4:25pm
All good and great but the retail loans are only 39% of the book and the bank is able to make 18%
ROE. How is this possible? Which large corporates that paying that much huge interest to the bank?
Seems the bank is getting into wholesale and other very big large lending deals. Otherwise it’s almost
impossible to have this kind of growth. The bank just added a kotak bank interns of deposit growth just
in an year… how is this even possible in such competitive market. I’m not implying any wrongdoing
but these numbers are too good to be comfortable.
I don’t think increasing corporate book in this upcycle is a bad idea. In fact, it might be one of the best times
to lend to Corporates given that balance sheets are relatively clean and the RBI most likely doesn’t have
much further to go with the repo rate as inflation seems to be peaking out for now. If everybody chases
granular retail loans, then who will lend to the corporate sector to fulfil the huge capex plans across infra
and industry?
12 Likes
Ayshi 516 January 15, 2023, 11:18am

Ps. There have been certain omissions/paraphrasing in these notes. It is not a word-for-word transcript.
MANAGEMENT COMMENTARY
Srinivasan Vaidyanathan
• Aggressive branch expansion at 7183 branches vs 5779 branches in Dec 21

• 64% improvement in turnaround time
• 30% improvement in engagement in digital property
• LCR 113%
• Provisions = 2800 crore
• PCR = 73%
• Total Provisions = 166% of Gross non-performing loans
• Write-offs were 3100 crore
• Sale of NPA – above 200 crore in the quarter
• Total Credit Cost net of recoveries was at 52 bps
• Secured loan book was at 73% of the total book
Q&A
KUNAL SHAH – ICICI SECURITIES
Q: On Operating Expense, and particularly the Employee Cost side, we have added a lot of employees over
the last few quarters, but was there anything extraordinary within that? As sequential growth was also quite
high…if you can highlight on that part?
• On is that normally…3rd quarter is seasonal

• There is lot of activity in that time period
• On the people cost, apart from adding of people, both for business growth and branches, there is also a
tranche of 250-300 crores approx that would come in for RSU (Restricted Stock Units) – It’s not a one-time
thing as it comes in usually – which would be up compared to prior year, as well as prior quarter, because
the ESOPs and RSUs both were effective in around end-October
Q: And in terms of the Other Interest Income, it is at around 800 odd crores, so what is that actually to
pertain to? As that is what is driving the NII – otherwise broadly if we look at the advances, investments
and expenses, then NII growth seems to be about 22 odd %
• Other Interest Income – that’s the income that comes from non-lending
• It could be income that comes in from RAD (Refundable Accommodation Deposits) of Deposits – that
could be one.
• The other thing I called out – which is about 6 bps – is the interest on Income Tax Refunds
• That quantum would be around 300 odd crore
SURESH GANPATHY – MACQUARIE
Q: On Deposit accretion, if you look at Q2, Deposit accretion was 600 bn, or previous quarter is was 680 on
overall deposits, the initial guidance was that you want to take it to 1 trillion rupees, with every quarter
showing an improvement – but that has not happened in Q3. In fact, Q3 has shown a decline compares to
Q2 in terms of absolute accretion of deposits. So, what’s happening here? Are we on track to get that 1
trillion rupees accretion?
• Good point Suresh

• Our objective was to take that 60, to 62, to 28, to 100 thousand as we go, and yes, this quarter if you look
at retail, it has come at 67,000 crore – retail came in quite well, yes.
• It didn’t come in as much as we had thought
• We thought it would be north of 80,000 or above
• We did put in an audacious goal of how to get there, but we are still – the mindset and the drive and the
distribution network and leveraging of our existing relationships in Q4, and we believe that more consumer
spending has happened broadly in the country.
• And we see that in our own customer base too
• If you look at our card spends, retail card spend grew about 27% - so people are spending on other things
that they want to do
• So that’s part of what has happened
• But we are still on track to get sequentially up
Q: On margins, your margins are flat QoQ, and even YoY as a matter of fact, so the bulk of the deposit rate
hikes have happened between September to December – you can see almost all banks, SBI, yourself
included have hiked deposit rates aggressively – so if you’ve not seen a margin expansion this quarter,
especially when deposit rate hikes are yet to flow through, what happens in the next quarter when at least
some of these deposits repricing, or at least incremental flow will be at a higher rate.
Do you think you can sustain current levels of margins, or do you think there could be any margin pressure?
• Again, very nice and very correctly you are asking that
• It is correct that, to expect that deposit pricing factoring in as we go along, will increase – because prices
have started, and there will be a full quarter impact and if there is one more rate hike, there will be further
coming in.
• But along with that, the loan pricing also happens.
• Our position is more or less a balance
• When deposit pricing goes up, we also get up on the pricing of the assets
• MCLR is a good indication (Marginal Cost of Funds Lending Rate) to see – while not all loans are there –
but an enormous amount of retail loans go off MCLR – I mean, there are even other SME type loans that are
based off MCLR – if you look at that, we have enhanced that more than the deposits funding
• The 3rd thing, the margin pick-up, I think over the last 4-5 quarters we’ve been saying, that the margin is a
function of mix of products.
• To the extent deposits goes up, asset yield goes up – keep the margin constant, or thereabout within a small
range – but the margin going to the middle or higher end of the 4, 4.4, 4.5 is a function of mix of wholesale
and retail
• Despite, retail growing 5% up sequentially, the mix is still 45% Retail, 55% Wholesale
• And couple of years ago, before Covid, it was 53 - 55% Retail – so the mix needs to change for the margin
to go up
• We are confident that we need to keep up on the yield to keep pace with the deposit cost growth
opportunities
Q: With respect to RBI, have you heard anything from them about the statutory relaxations that you have
sought, if not, what would you think would be the timeline to hear something on that front?
• Not yet, Suresh.

• It is expected within the next month
• There is no particular timeframe
• The merger process is progressing – the NCLT hearing is on 27th January
• Post that, there are some other regulatory processes to go through – So it will take some time
MAHRUKH ADAJANIA – NUVAMA WEALTH MANAGEMENT
Q: Your asset growth for the quarter was just 3% QoQ, whereas you know at the time of merger, the
analysts were given a guidance of 18% YoY – even on a merged balance sheet basis, so does that stay? And
were there corporate loan exits at the end of the quarter?
• There are 2 aspects.

• The way you think about the loan is not Quarter-to-Quarter, but that is why we give kind of an indication
to look back to see how the bank has grown the loan book over a period of time
• You can look at a 3, 5, or a 10-year bock, whichever you look at, we see every 5 years, 2.2 times or 2.3
times or above
o That is about 18-20% YoY
o That is historical yearly – but QoQ, there can be variations
• This quarter if you see, still it is 19.5% - and the growth of the IBPC, the loans grew 23.5%
• Loan growth can come and on wholesale that we touched upon, it’s a matter of how we prioritize what we
want and at what price
• If you look at the wholesale, the spreads are such that – if you look at the bond spreads, in the process,
bond spreads widened in the quarter, the loan has to come in catch-up over time.
• From a pricing point of view, we took a stance to, we’ll wait for the price to come up – and so the
wholesale was -1%
• The bond spreads went up from 30-60 bps.
• We do have to wait and see how the loans start catching-up on the yields from an opportunity point of
view, where the other banks in the country, and other financial institutions would appropriately start to price
in, after looking at how the bank rates are moving – so QoQ movements will be there.
Q: My broader question was that some of the economies have already downgraded growth forecast for
India. What is your sector growth assumption for FY24? And then of course you would grow above the
sector to justify your 17-18% YoY for the next 2-3 years. Do you think there is adequate growth to grow at
18% with quarterly variations?
• It is fair assumption
• It is a practical thing
• We see good demand for loans – over 35,000 crore of loans – we didn’t go through with this
• Because the pipe has to catch-up with what we are seeing on the bond market – so we let go
• We do see good demand, in the NBFC sector or the PSU, Retail and infra segment
• We are also seeing good new demand from loan through PLI, or other assets we are also confident.
Q: What would be the quantum of interest on tax?
• 6 bps would be around 300 crore
SAURABH KUMAR – JP MORGAN
Q: Could you comment on the revolve rate on the card? What would be the LCR growth on average for the
period end? Coming back to NIMs, this time HDFC bank has shown lower NIM sensitivity when you look
at private sector peer growth – as will this continue going down the line?
• Revolve rate – we haven’t seen any pick-up in revolve rate – we are still at 65-70% of the pre-covid levels
• We don’t see pickup in revolve rate
• It is slightly down by a percentage point or so in this quarter
• It normally goes down when you see higher levels of card spend due to various festivals
• We are not seeing a pickup in revolve rate – it is drastically lower than what we have seen in the past
• We are confident that the industry will come back
• About LCR, I did allude to 113% LCR in the quarter
• You asked about the NIM in the context of the rate move - you can think about our NIM over the last 3
years – before the rate started to god down and now in the current period – it operates normally between
3.94 to 4.4
o And the function of NIM going up or down is a function of product
o More retail composition of the portfolio gets you higher NIMs and comes with higher credit cost, credit
cost comes with a sight lag – that is the model
• The cost of funds other than the yield and lag effect will move more or less on QoQ variation.
• If the rates were to go down in the 2nd half, we would still continue to manage NIMs in the steady state
manner
HARDIK SHAH – GOLDMAN SACHS
Q: Coming back to deposit growth, for the whole industry really, it is not showing any acceleration – and
banks and all are kind of increasing the rats. There is clearly pressure from alternate channels. Do you think
banks will have to reach the savings rate as well in the next couple of months? Based on deposit
mobilization?
• I usually don’t want to take a guess – but that has been something over a longer period of time has been
more or less within a small range – so that is not something that has generally happened
• We don’t lead with this, but we will follow the leader on this front.
• But we price slightly above the largest bank player in the country on the savings
Q: What measures can bank take? Or eventually the growth will have to take a knock. How will y’all
imagine a growth kind of mix?
• The growth of deposits – one is that market itself grows at a certain rate; and the goal is to grow faster than
the market to gain the share
• The share is slightly under 10% and grows at 80-100 bps in the last year – and in the last 5 years you see
that is 400+ bps market share gain
• We strive by expanding our distribution to get closer to the customer and form better relationships
• It is all about getting the customer in and deepening the relationship
• It takes about 21-24 months for customer maturity cycle to peak
• With a market share slightly under 10%, it is a long runway to go and get that.
Q: On the cost side, you opened more than 700 branches in this quarter. How many more do you want to
add in this quarter? And what are the kinds of costs that are yet to accrue with respect to branch expansion –
is it reflected in the numbers, or will there be a spillover in the 4th quarter as well? Plus whatever, you’ll
open up in this quarter…
• The branches we intended to open – the 1500 to 2000 branches – we probably will open…in the pipeline
we have another 600 branches
• We keep adding into that
• We know the locations and the number of branches we have to open – it’s about getting the leads in an
appropriate manner
• Yes, we are pursuing the branch build strategy
• Costs will mostly come in the following quarter.
• Cost will spill into the following year itself for whatever takes place in the latter part of this quarter
• From a cost point of view, it depends on the timing
Q: Did we do any buyouts in the Priority Sector?
• We do buy in the market – different products

• One is to do with the core growth
• Core PSL growth is 35% up YoY – book we originate on the books and keep
• This gives good RoA – that is the priority and the push
• Continuous evaluation happens between different strategies
Q: Do we have any shortfall there?
• Excess gets determined at the end of the year

• Typically, the overall PSL is 40%
• That is where we are always there – and even now we are there
• It’s a question on how we get to the right kind of composition in the agricultural and the Micro
• We look for organic growth – It is tough to get organic growth; when we can’t find it, we go to the market
Q: On Consumer Behavior, our personal lending growth has been strong QoQ, but we see inflation is high,
EMIs have gone up – how do you see this portfolio shaping up? Asset quality seems strong but do you think
growth will take some knock due to these factors?
• Retail card spend growth is at 27% - that is good

• Acquiring spend is also in the 20s – which is robust
• You are seeing, people are spending
• There is enough liquidity within the customer base; the card customers’ liability balances in the bank is
over 5x.
o That means that if there is 100 Rs of a card receivable balance on an aggregate level, the deposits from
that bunch of customers is like 5 times.
• Pre-covid it was 3.5-4 times
• People have built up liquidity and it seems to be there
• We do see good amount of spend happening
• Therefore, personal loan book should grow
NITIN AGGRAWAL – MOTILAL OSWAL
Q: Can you provide some colour on credit card acquisition strategy? We recently talked about doing 1
million cards per month, how are you planning to achieve that? What is the timeline?
• We acquired 1.2 mn cards in the quarter, and I don’t we think we’ve said 1 mn per month.
• If anything, it’s more of a strategic call that I can tell you about 1.2 mn this quarter; and the prior quarter
was slightly less than a million > That’s the kind of rate at which we are acquiring cards
Q: This quarter, we have consumed small amount of contingent provisions, so what is your approach to
utilization of these provisions going ahead?
• We evaluate QoQ on what to do

• But broadly, during and before covid, we made some provisions according to economic considerations
• We keep evaluating the market conditions and that’s how we keep the provisions on the book
Q: On the liabilities, this quarter we have reported a strong TD growth, almost 6% QoQ, so can you share
what has been the mix of savings deposits which have moved to TDs? What is the proportion of CA in
incremental deposits?
• It is a mix of both
• Savings account growth was 13-odd-percent in the quarter
• Time Deposit growth is about 27% or so
• The CA growth YoY is 8% but retail current account – which is the granular account – which is a big
focus for us – is a 14% YoY over the wholesale current account which de-grew by 4% in the quarter
• The CASA ratio is 44%
• The long-term CASA is about 39-40% in the long term
• And if you think about the time deposits last year, in FY22 grew only by 7%
• It’s a question of customer’s preference and the rate cycle that happens.
KUNAL THANVI – BANYAN TREE CAPITAL ADVISORS PVT LTD
Q: Can you throw some light on break-up of employee addition? Branch-related and others? And within
others, what are the areas where we are adding employees? Because last 9 months we are added around
25000 employees - How many were for new branches and how many much is non-branch?
• Most of the staff addition would be in front-line; i.e., asset sales (retail asset sales), branches – Out of 30
odd thousand, 60% would be simply, directly branches; and when I say assets – it is both cards and the retail
assets
• We have about 84% or so of our people in the customer facing role
Q: On fee income, the share of credit cards and payment products have gone to 34% for this quarter – can
you throw some light on how the contribution of fee and payments have been improving? What is the
outlook there?
• The payment business was 32% of the total fees last quarter. It’s 33% in this quarter – so it is more or less
in that range
• Normally, 3rd quarter it contributes higher than what is contributes historically
• Last year Q3 was an upgradation for some other things, while coming off from restructuring, a lot of risk-
related type of fee – check bounce fees, or late fees, or over-credit fees, etc have now scaled down
• But otherwise, there is no particular outlook I can give, as it is a function of customer behavior
MB MAHESH – KOTAK SECURITIES
Q: What is the accounting treatment of IBPC? If and when HDFC mortgage book customer comes down to
bank, how does the pricing of those loans move – as they have different interest rates regime and banks
have a different interest rate regime?
• It is mentioned in some public document somewhere in terms of what that is and we can take It offline -
One of our finance team can talk to you
Q: Do they have to move to EBLR or do they have a choice to continue where they are? About the
mortgage…
• There will be a one-time change that we will do when the migration will happen
• We are looking into the integration process – and once we reach a decision, we will communicate with
the customers
• Customer will have a choice to pick the external benchmark whatever they need
Q: So, does increase in loans through IBPC have any impact on NII?
• It will impact NII if IBPC is done above or below the cost of funds
• Gross of IBPC loan growth is 23.5%
• On NII Line, there will be some impact – rate at the time could be 5 bps or 10 bps
Q: What is the definition of a retail current account?
• Retail current account is customer managed out of the branches

• Wholesale customer is normally a big corporate
• Retail could be Merchant around the corner somewhere, or it could be certain institutions where the
branches are managing those accounts
PRANAV K. – BURNFIN (?) PRIVATE WEALTH MANAGEMENT
Q: How does the change in loan book mix drive change in NIMs? Is there a change in the relative riskiness
of the segment?
• The Change in our composition that we saw on the wholesale from 45-55% - we did see a significant
improvement in quality, as they are highly rated corporates
• Our wholesale book is at an average internal rating of AA
• It comes with the lower risk rate
• Retail comes with a 100% risk rate and that is why, wholesale comes with a lower margin, cost to
income is very low and the credit cost
• Retail comes with higher margins, but higher cost of origination, higher cost of maintenance, will come
with a credit cost, and credit cost can come with a lag to – and that is a part of the margins
• From a return point of view, more or less it will be matching – from an ROA it will be approximately 2%
- irrespective of the segment we operate, we manage to optimize our RoA – because if the margin is low,
credit cost is low and so you get to the margins, and returns you want to get.
• As the shift has happened the RoA remains to be stable
X.
17 Likes
Surender 517 January 16, 2023, 5:14am
Vikky9995:
All good and great but the retail loans are only 39% of the book
A very pertinent factor for a NBFC to source funding at competitive rates. However, cheap (~3.5% interest
expense) retail deposits (~65% of the B/S liabilities ) are the main source of funding for HDFC Bank.
Hence, not a very important factor to be considered.
Vikky9995:
Seems the bank is getting into wholesale and other very big large lending deals.
Wholesale lending is forte of HDFC bank and it’s good that bank is harnessing such (large deals)
opportunities. Trend (both absolute and relative) of past NPA’s gives confidence that the management knows
how to control risks for such a kind of lending.
Vikky9995:
bank is able to make 18% ROE. How is this possible? Which large corporates that paying that much
huge interest to the bank?
HDFC’s cheap source of funding (deposits) ensures competitive lending rates (attracting more and more
deals). In turn, the bank can earn NIM(~4%) that could give decent ROA(~2%) without chasing high yield/
risk lending opportunities. Finally, leverage (that’s majorly contributed by retail operations, negative capital
employed) of 8~9x ensures ROE of 16~18%.
10 Likes
theashworld 518 January 17, 2023, 2:49pm
From mint. After all, opening so many branches aggressively might not help. New-age banks are offering a
higher rate of interest and people seem to be gravitating there… From the article
Raising retail deposits will be a challenge due to increasing competition.
Fin — HDFC Bank to miss quarterly deposit target of ₹1 trillion | Mint.pdf (6.7 MB)
ranvir 519 January 17, 2023, 3:48pm
It was clarified by the management that Rs 1 trillion deposits/ Qtr is their aspirational target and not a
guidance. So, it has to be looked at from a 2-3 yrs perspective.
Disc : invested, Biased.
Treasury income for HDFC Bank is subdued from the last 3 quarters although ICICI Bank has done
relatively better.
Any thoughts?
Data:
Treasury
ICICI
Dec-22 Sep-22 Jun-22 Mar-22 Dec-21
Treasury
Revenue 22147 20022 18358 17444 17090
Result 4151 3042 2609 2323 2051
% PBT 19% 15% 14% 13% 12%
HDFC
Dec-22 Sep-22 Jun-22 Mar-22 Dec-21
Revenue 9551 7910 7380 7899 9192
Result 775 12 266 1384 2531
% PBT 8% 0% 4% 18% 28%
% Treasury PBT of Overall PBT 5% 0% 2% 11% 18%
Source: Quarterly Results
1 Like
Souresh_Pal 523 January 28, 2023, 9:40am
Imo ppl don’t keep money in banks like hdfc icici sbi for interest rate
1 Like
sujay85 524 February 25, 2023, 6:02pm
Hi all,
Anyone aware of the PayZapp app of HDFC Bank may have known that it used to be the most archaic and
buggy apps made by any top bank. It was there to onboard new customers to the bank (like Freecharge is for
Axis Bank) but the experience was not conducive on that front. However, they have just upgraded the app
and the new interface is snappy, clutter-free and pleasant. It is still a beta version at the Android app store
and so have some bugs, but is worth trying. This is the first time I got this feeling that the new tech team is
doing it fine. Good mobile and net-banking experience could be essential for retaining and engaging
customers and attracting tech savvy populace. So, I am pretty happy as a long time HDFC Bank
shareholder.
PayZapp
PayZapp - Online Payments App | UPI Money Transfer | Bill Pay | Recharg...
Free
10 Likes
Sidharth_Chandraseka 525 February 27, 2023, 6:57am
Here is a snippet from Indiabulls housing finance Q3 concall, where management mentioned HDFC will
vacate wholesale business post merger.
Anybody knows why? Does that mean the consolidated entity will stop fresh lending to wholesale
developer finance? Is there is any restriction that Banks should not do wholesale lending?
1 Like
theashworld 526 February 28, 2023, 2:33pm
HDFC Bank customers face internet banking, mobile app glitch;

bank replies
HDFC Bank users on Tuesday complained about the bank's servers being
down, saying that they could not access netbanking or mobile app services. Some users complained
on the day that they were not able to access the services for over two hours. While...
Personally I think it would be good to get some insider to opine on why their IT system has so many issues?
It’s unusual.
Disc: long since a long time (15+ years)
6 Likes
valueinvesting101 527 February 28, 2023, 5:41pm
Seems to be clear case of under investment. I believe their compensation lags pay available at Indian IT,
MNC back offices, Foreign banks with offices in Mumbai, Start ups, Global Tech workforce in India.
Given Aditya Puri’s attitude towards technology, it is not surprising that they have not invested enough for
years. Given widespread availability of Internet since 2015-16, it is coming to bite them and they continue
to lag due to inadequate investments.
3 Likes
sivaram 528 March 4, 2023, 4:09pm
Pretty much. And time for RBI to do some slapping as they did earlier for the CC biz onboarding. As a
shareholder and account holder, I can see their processes being hopeless. The only difference is they’re
polite about it unlike SBI which will not say anything or be rude to you
1 Like
theashworld 529 March 9, 2023, 10:39am
Data of 6 lakh HDFC Bank customers leaked on dark web? Here is what the bank says - India Today
the tech disappoint just continues on and on … this is really disappointing and also perplexing.
Disc: long since a long time (15+ years)
ashit 530 March 10, 2023, 6:04am
https://twitter.com/ETNOWlive/status/1634042494634606592?t=i2rkss_Zqw0kFtz6GxBDig&s=19
Most of the things are known but well articulated

Worth 18 minutes
aneesh2312 531 March 16, 2023, 3:38pm
Maybe a basic question, but can the share swap ratio of 42 HDFCBANK for 25 HDFC be changed closer to
the merger date?
Right now, there is some difference in the market price of HDFCBANK and what HDFC converts to
(around 40-50 rupees discount on HDFCBANK) based on the ratio. So, if I am ready to take the risk of
merger not going through and any difference in dividends, it would make sense to sell any HDFCBANK
which were bought > 1 year ago and buy HDFC in lieu of them?
investor12321 532 March 17, 2023, 2:25am
In theory, something could go awry and the merger ratio could change - but the probability of that
happening, in this case, is effectively 0.
Since the announcement, the arbitrage has been roughly between 2%-5%
I estimate it is currently around 2.8%
That said, switching would also depend on your tax basis primarily and there is some frictional cost around
commissions etc.
No point in enriching the government while actually losing money on a net basis if your tax basis is low
enough.
1 Like
Vinayaka123 533 March 17, 2023, 2:26am
Aren’t there tax considerations by selling your current holdings of HDFC bank and buying HDFC? Ltcg is
still 10 percent right? Do you still come out ahead?
If you are sitting on a loss on HDFC bank position, then it makes sense to capture it and buy HDFC.
2 Likes
aneesh2312 534 March 17, 2023, 3:13am
I see, thank you!
In my case, I have enough long term shares to cover the cost of commissions/other taxes and still come out
ahead, and not enough profit that I end up paying extra tax (as ltcg or because of taxable income crossing
some threshold) so I guess it should be worth doing it.
aneesh2312 535 March 17, 2023, 3:15am
Makes sense, thanks! I have a net profit but my booked ltcg won’t cross the exemption limit for the FY, so I
won’t pay any extra tax. So I guess it is worth doing it for the long term shares in my case.
Shubham_Jain1 536 March 17, 2023, 5:33pm
What are the commission’s and taxes associated with the merger?
I thought there shouldn’t be any or very miniscule.
1 Like
s.j.saha 537 April 15, 2023, 8:32am

Q4FY22-23 Results
HDFC Bank reports 20.6% jump in net profit in March

quarter: Report
HDFC Bank reports 20.6 per cent jump in consolidated net profit.
Rs 19/sh dividend declared
Financials
https://www.bseindia.com/xml-data/corpfiling/AttachLive/
223e6561-0adf-4050-896c-515773148a99.pdf
d759ae7e-9a6f-46cc-a0c8-492af3620e2f.pdf
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4 Likes
ranvir 538 April 16, 2023, 6:24pm
HDFC Bank Q3 concall highlights-
Industry Mkt share in Advances at 11 pc, in Deposits at 10 pc
Customer base at 8.3 cr
Total branches at 7821 (opened an avg of 04 branches per day in FY 23 !!)
52 pc branches in rural and semi urban areas
Credit card Mkt share at 28 pc !!
NII - 24940 vs 20350 cr, up 23 pc

Non Interest income - 9610 vs 8380 cr, up 15 pc
Operating expenses - 14590 vs 11010 cr, up 33 pc (due massive branch expansion)
PPOP- 19960 vs 17720 cr, up 14 pc
Provisions- 2680 vs 3320 cr, down 21 pc
PAT (consol)- 12590 vs 10440 cr, up 21 pc
Total Advances at Rs 16,14,200 cr, up 17 pc

Total Deposits at 18,83,400 cr, up 21 pc (big achievement)
Cost/Income at 42 pc- despite massive branch expansion
NIMs at 4.1 pc vs 4.0 pc
RoA at 2.2 pc
Capital Adequacy at 19.3 pc, Tier-1 at 17.1 pc
Retail:Wholesale deposits at 83:17
Retail:Wholesale Loans at 47:53

10 yr Advances CAGR at 21 pc
10 yr Deposits CAGR at 20 pc
10 yr PAT CAGR at 21 pc
Asset quality-
Gross NPAs - 1.1 vs 1.2 pc

Net NPAs - 0.27 vs 0.33 pc
Bank’s POS machines currently operational at 39 lakh, up by 30 over previous FY end
Bank’s merchant App- Vypaar added 75,000 merchants per month in FY 23
Branches offering wealth management, now over 900 vs around 700 LY
Branches offering gold loan at 4182, up by 3X vs Mar 22 (bad news for gold loan companies)
Added 1.06 cr new liability customers in FY 23!!
Employee addition in FY at 31600 !!
CASA ratio stands at 44 pc

Q4 loan growth breakup -
Retail loans up 21 pc
MSME and priority sector loans grew by 29 pc
Wholesale loans grew by 12 pc
Express car loans gaining tremendous traction, now constitute 20 pc of all car loans
Slippage ratio for Q4 was 28 bps (this is too good)

Recoveries and upgrades in Q4 were 22 bps (awesome)
PCR at 76 pc. But if u add contingent, general and other provisions, this jumps to 176 pc of GNPAs (eye-
popping)
HDB Fin Services (subsidiary) reported improvements across loan growth, PAT and asset quality. Its full
year PAT almost doubled to 1950 cr !!!
HDFC Securities revenues and PAT de-grew slightly in Q4. Full yr PAT was 777 vs 984 cr LY
CV portfolio of the bank grew 11 pc QoQ (V Strong growth)
Benign credit cost cycle allowing the bank to go full throttle on branch expansion without worrying too
much about expenses
43-44 pc loans are fixed rates loans with avg tenure of 2.5 yrs
Retail loan book : Wholesale book to grow because of aggressive branch expansion
Branch addition speed ( which is already hyper ) to continue in FY 24 as well, subject to Qtly evaluation
Full benefits of this hyper addition in branches to be visible in 2-3 yrs as new branches and new customer
relation start to mature
Merger may get completed by July
My take -
Exceptional performance wrt deposit mobilisation, asset quality, slippages, provision coverage, acceleration
in retail loans
No discussion on Bank’s planned all new Website / user interface was a disappointment
Performance on most operational metrics - Superb
Disc: holding, biased
12 Likes
s.j.saha 539 April 26, 2023, 8:00am
MERGER UPDATE
1 Like
ashit 540 May 26, 2023, 1:41pm
Investor day
2 Likes
sarthakkumar19_ 541 July 12, 2023, 4:02am
Question for experienced folks
Would the breach of 10% holding limit for mutual funds create pressure on price in coming weeks. What is
the likely scenario.
Thanks
1 Like
ranvir 542 July 12, 2023, 2:20pm
IMO… this is known to the Mkt for over 2-3 months now. A lot of rejig would have happened by now.
Some more may be left
Should not be such a big issue …imho
s.j.saha 543 July 17, 2023, 9:37am
Q1FY23-24 Quarterly Results
Key Parameters
723fb80a-2dde-42a3-9793-7ae1be57c87f
HDFC Bank Q1 Results: Net profit jumps 30% to Rs 11,951 cr,

maintains healthy...
HDFC Bank Q1 Results: The bank's gross non-performing assets (GNPA)
ratio stood at 1.17 percent, improving from 1.28 percent in the corresponding
period last year
Concall
Transcript
989cf3a5-9a81-458e-b0ec-7ea60cc482a7.pdf
320.90 KB
Presentation
723fb80a-2dde-42a3-9793-7ae1be57c87f
Financials
26f5a2f0-e828-4b44-8a8c-7366c0e45b6a.pdf
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Press Release
cb44d44f-d35d-4ce7-9f95-797f3b3884b1.pdf
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5 Likes
Ayshi 544 July 18, 2023, 3:53am

Highlights of the Q1FY24 HDFCB Earnings Call:
My Summary
HDFC Bank reports margin contraction, decline in EPS, and an increase in NPA. But the management
strongly believes that there is a seasonality effect in Q1 and growth will pick-up here onwards.
There was emphasis on the fact that the company never engages in “deposit-pricing wars” to gain market
share and will continue to focus on building a better relationship with their clientele.
Management Commentary:
Mr. S. Vaidyanathan, CFO
Merger update
• Subsidiaries of HDFC have become subsidiaries of HDFC Bank

• We want to thank all the regulators for their support
• Seamless integration of expertise, onboarding talent and etc is done
General Update
• PMI and CMI level augurs well for potential customers of the bank
• Robust growth showing strong customer demand
• Uneven monsoon has impacted sowing. Increased NPAs in agri portfolio.
• Overall, we see resilience in domestic demand on the back of investment in infrastructure
Key Themes
• 39 branches added in the quarter

• 1.7 lakh villages reached – 2 lakh is the target
• Customer franchise – we added 2.5 million liability customers
• We have issued 1.5 mn cards
• Website receives strong traffic
• Focus on granular deposit is continued
• Retail deposits added 38,000 crore in the quarter at the rate of 2.4% QoQ
• On a pro-forma basis, retail constitutes 83% of total merged deposits.
• Technology agenda continues – 12.5 million unique customers on the website
• 1.5x increase in customer spends
• Want to drive distribution as well as customer engagement
• LCR on a pro-forma basis was over 120%
• CAR is at 18.9%
• NII was 72% of Net Revenue
Other Income
• Fees & Commission accounts for 2/3 of the other income

• Recoveries from written-off accounts and dividends from subsidiaries accounted for 1000 crore
In the medium and long term, customer reach is the key.
• GNPA from 1.7 from 1.28 in Q1FY22

• GNPA excluding agri = 0.94%
• Slippage ratio is at 5800 crore – 4200 crore if you exclude agri
• 2100 crore of write-offs
• PCR is at 75%
• Credit Cost annualized was at 70 bps
HFL
• Added 6 million customers

• Digital offerings are very lucrative
Continued strength has been shown. PAT increased by 30%. RoE of 17.3%. EPS is at 22.2 at consolidated
level.
Q&A
Suresh Ganapathy - Macquarie Capital
Q: On deposit growth. Quarterly fluctuations are there but on incremental business, it seems like you have
lost market share.
• Typically, Q1 is a slow quarter across various parameters

• Typically it is in single digits
• It’s not about 1 quarter, you look at how we built on top of that in March – 50,000 crore came through in
March
• In Q1, we will usually see Current Account Deposits come down, and Savings account deposits
moderate
• Issuing cards and spending grew 30% on the retail cards
• We are confident that the building blocks we built, will lead to enormous growth in the next few
quarters
Q: On advances, the merged entity grows at 15% but you said it has grown at 18%. What number to go by?
• Page 23 of the earnings

• The bank’s advances grew by 20%, and HDFC’s individual loans grew at 14%
• HDFC’s non-individual loans de-grew by 18% YoY – there has been management attention given to
figure out why this happened
• So there is 16% growth all-in-all
Q: Can you sustain the current levels of RoA?
• Level of confidence is very high

• We are looking at 1.9 – 2.1 RoA
• Broadly, that is where we are targeting and know we will be at
Mahrukh Adajania – Nuvama Wealth Management

Q: On Opex, this also happened in the last year’s Q1, Opex growth scales up in the 2nd half (600-700
branches in each quarter in the 2nd half). 8% sequential growth, will it come back?
• 8% QoQ is the build-up of the branches that has happened there

• We built capabilities and build branches
• When credit reverses to mean, you need the maturity cycle to come to fruition.
• We have started in some extent in the Sept quarter and properly in the December quarter
• Not all of the credit cost is reinvested
Q: On loan growth and incremental deposit growth. Loan growth you had indicated doubling of growth –
merged balance sheet has grown at 13%. Can we see 17-18% growth as we end the year?
• 3-4 year periods, it indicated 17%-18% growth

• Our capacities are built and that is how we are gaining traction to reach this level
• On an overall basis, we are confident on credit demand but only at the right price for us.
• We were not shy in refusing to participate in certain loans that we didn’t like
Q: Would you be able to quantify the CRR and SLR for the quarter?
• Not really. We provided you high level terms of how we are supporting growth and liquidity
• On combined basis, we are quite comfortable to meet the regulatory requirement
Kunal Shah – Citi

Q: On retail deposit side, last time it was quite encouraging. Q1 has some side of seasonality but with the
investment and capabilities we have, what is the traction you see for the next 7-8 quarters?
• We don’t give forward looking statements

• Seasonality is low
• This will come back up and we will drive that back
Q: Credit growth doesn’t account for IBPC (inter-bank participation certificate) , right?
• IBPC is a very transient book – it goes out and comes back in

• We manage it QoQ
• There are a few objectives from Priority Sector Lending point of view, liquidity Point of view
• We don’t have a target for IBPC – it is opportunistic
• If we get a good price, we pass it on
• PSL and our ability to do what we need to do – it depends on what the market is pricing
Q: What will be the Integration costs with respect to the merger?
• They are all within reason, nothing substantial

• We will call it out as we finish this
Saurabh Kumar – JP Morgan

Q: On deposit cost, Interest cost is up sharply QoQ. On HDFC mortgage book, it is already repo-linked,
right?
• Deposit cost is a function of the mix that has happened

• It depends on growth in Time Deposits – that depends on the market rates
• We try to price it at a rate a little below market rates – so it gives us a bigger duration
• We have pitched at rates where only SBI is slightly above us for almost all products
• Mortgages, you asked about the EBLR, it will move to Repo based pricing. But it starts off with no
impact on the customer.
• It will be competitively priced
Q: What impact will it have on NIMs?
• If you look at how HDFC managed - we have taken the same people and similar risk philosophy, we had
narrow margins because we were fairly hedged – so HDFC’s NIMs didn’t jump out of the range
• So upcycle or downcycle, it will continue to be managed
Rahul Jain – Goldman Sachs

Q: Going to your statement of you using low credit costs to expand – till when will you be able to sustain
this?
• There’s no crystal ball about when the credit returns to mean

• Few quarters ahead of time, we will figure it out. Risk management will tell us.
• The Quality of book is sound
• Maturity cycle of the product and the credit will evolve – then by the time the reversion comes in, in
12-18 months, we will already be prepared
• In 18-24 months, the base effect also steps in
Q: On segmental growth, home loans have picked up. Everything else is subdued. Is this effort…or only
quarterly phenomenon?
• It is only a quarterly phenomenon

• It is always mid to double digit growth in Q1
• There is a good amount of underlying demand that is there.
• 18-20-22% growth is what our risk management looks and determines. Every growth gets monitored
and evaluated.
• Demand is far higher that the growth that they allow
Q: Any incremental colour of PSLC, RIDF?
• I want to be careful of the price in the market

• We have tranches of requirement
• At an aggregate level, we are higher than required
Q: Any one time costs expected from the merger?
• There will be some merger related costs but it will be in the manageable range
• Nothing out of the page in a big manner
• It could be some capital assets we will pull in for capacity building

Q: On wholesale book, how much is left to rundown?
• It has come down 18% over the last 12 months

• That was a part of the management action
• I don’t have one number where we will settle but we keep evaluating the number
• Our wholesale book is not just a lending book, but a whole relationship book – we provide them a
plethora of other services
• Here we are evaluating it – we will want to grow it at some point of time, but not now.
• We very much want to be in this segment
• Construction lending is very closely linked to mortgage lending
• There is no chance that we will not be in this segment – as we need to have insight into that
development
• Land financing types, project financing that doesn’t meet regulatory requirements – we will not be
doing. This could be 5-10K crore but we are yet evaluating this
Q: On deposits, incremental deposits market share is at 25%, but we are at 20% right now –so incrementally
would you have to raise rates to fill this gap? Will this lead to stickier rates on the Cost of Funds?
• We don’t drive a business thinking of the market share. We don’t look at that
• We look at what is our funding requirement
• There is no mindset about market share target
• We have stated in the past, since a very long time – not just the past 2-3 years – that the bank has
demonstrated discipline in pricing
• We never lead volume by pricing – it is about being closer to the customer – that is how the
branches have been built.
• The branch strategy was accelerating since some time to build the pace
• 2.4 mn customers added this quarters, then you engage with them to gather some more balances
• Our penetration in Term Deposits has grown by around 50 bps point – which may seem less, but the base
has also grown
• Any point of time, TD pricing was at peer pricing benchmarks
• Pricing is not the lead consideration of gathering deposits
Q: Is RoA calculated on quarterly bank balances?
We will share with you the denominator

• Incremental Credit to Deposits is up because of the merger
• Pre-merger it was at around 80-83%
• It can’t be brought down immediately due to the maturity profile
• It will play out when it comes down in 3-4 years down to normal
Pranav – Burns (?)
Q: If we didn’t go down the IBPC route, what would’ve been impacted? What would you have to sacrifice?
• The base line for on the basis of which Priority Sector Lending is determined, goes down in the IBPC
route
• From a pricing PoV, there is better pricing - it gives you a good pickup in the spread
• You’ll be more leveraged, and therefore the benefits are higher.
Closing Comments
• Further questions can be taken up with our IR team
• We look forward to speaking some other time
X.
Ps. There have been certain omissions/paraphrasing in these notes. It is not a word-for-word transcript
16 Likes
Surender 545 July 19, 2023, 4:33pm
FY23 AR has optimistic tone for the just concluded merger of HDFC Ltd. Snippets:
The merger has come into effect from July 1, 2023…The merger perhaps could not have been better
timed…… plan to contribute to the growth of affordable housing, as over half of our branches are in
semiurban and rural locations……completes our product suite through the addition of home loans…….
This would enable the Bank to serve its customers in a significantly enhanced way with a bouquet of
financial services……merger has now been completed within our estimated timelines and focus now
shifts on capturing the full benefits of the synergies and future proofing the Bank for the coming
decades….Buying a home is a family decision and an emotional one. This emotion is transferred to the
home loan service provider and helps build lifelong bonds with the customer and his family. Also, only
2 per cent of our customers source their home loans through the Bank, while 5 per cent do it from other
institutions. This itself is a huge opportunity. It is this bond with the customer that the Bank would like
to build on. HDFC Bank with its stronger digital platforms, digital journeys and physical branch
network will have the ability to offer the home loan customer a complete bouquet of the Bank’s and
subsidiaries’ products and services. Savings accounts, personal loans, insurance cover, SIPs can all be
bundled along with a home loan to create a compelling value proposition to the customer, that probably
does not exist in the market at the scale at which this is envisaged……A bigger balance sheet post
merger will enable HDFC Bank to take a larger exposure in infrastructure projects. This means we can
participate more meaningfully in India’s growth story and contribute to nation building. In light of all
this, the pace at which we aim to grow - we could be creating a new HDFC Bank every 4 years……
The merger with HDFC Limited is a positive for its long term growth story with the addition of the
home loan product to its portfolio opening up a significant runway.
However, market valuations indicate that merger is equivalent to COVID moment for the bank.
March 2020 March 2020

July 2023 (Post-Merger)
(COVID) (COVID)
HDFC Bank HDFC Merged Entity

Share
813 1500 1685
Price
Share
540 346 754
Qty (Cr.)
Mkt Cap 439020 519000 1270490
64158 73849 As a rough estimate, eliminated 21% of HDFC
PAT 27296 22826
Bank’s PAT from the combined Value of FY23
March 2020 March 2020
July 2023 (Post-Merger)
(COVID) (COVID)
444946 505611 As a rough estimate, eliminated 21% of HDFC
Equity 176350 126479
Bank’s Equity from the combined Value of FY23
P/B 2.5 4.1 2.8 2.5
PE 16.1 22.7 18.8 16.4
Any idea what market is factoring in?

7 Likes
Shubham_Jain1 546 July 19, 2023, 6:08pm
How did you calculate the pe for merged hdfc bank? That seems totally wrong.
It seems like earnings of hdfc ltd and hdfc bank was just added, but large part of hdfc ltd earning is through
hdfc bank due to the shares it holds. So the earnings of the combined entity is lower than the sum of
consolidated earnings of hdfc ltd and hdfc bank.
The real pe ratio should be around 20
6 Likes
Surender 547 July 20, 2023, 2:38am
Shubham_Jain1:
That seems totally wrong.
Yes, I missed the point you highlighted. Thanks. Revised numbers in my previous note.
1 Like
Perhaps its the size of HDFC Bank which is the limiting factor here. (in terms of market capitalisation)
Largest banks and bank holding companies by market

cap
List of the largest banks by market capitalization.
It is already among the 10 largest bank in world by market cap. (after merger with HDFC Ltd), the data is
wrong by around 20% on the above site I linked (around 7th or 8th largest by market cap)
The 4 largest Chinese banks each have 15-20x assets of HDFC Bank and 15-20x net worth. Even if I
assume HDFC merger is not reflected properly in net worth on the above site, their net worth and assets are
still 10x of HDFC, and yet they have same market capitalisation. (But they are PSUs).
According to me, it seems like the sheer size of HDFC Bank is very large. Perhaps the market is pricing
slower growth for HDFC Bank in future, perhaps NIM contraction or higher NPAs or something done by
government to ensure that 1 or 2 private banks dont capture the whole market?
3 Likes
The data is slightly wrong on this site. The market cap of HDFC Bank is off by about 15-20 %, but still,
HDFC BANK is among top 10 banks by market cap.
Surender 551 July 22, 2023, 4:53pm
Surender:
Any idea what market is factoring in?
I think I understand it now after looking at Q1FY24 presentation and the transcript of the Q1FY24
conference call. The merged entity’s loan growth [earnings] would be under pressure in the near-term
compared to the norm (consistent growth of 17~18%). 2 factors stand out:
1. Expected near term slow down in the loan growth of the combined entity: Growth in ‘Proforma merged
gross advances’ is shown as 13% whereas banks pre-merger growth is at 20% (Slide 23). However,
management’s commentary is to maintain growth rate of 17~18% but over a horizon of 4 to 5 Yrs.
2. Ongoing pruning of non-individual loans inherited from HDFC: Reduced 18% in the last 1 Yr. Right
now, this amount is INR 1097 billion. This will be further downsized, still under due diligence to decide
the amount and horizon.
4 Likes
calm 552 August 12, 2023, 12:12pm

HDFC Bank CEO flags funding risk post merger, says NIMs
may get hit
Sashidhar Jagdishan flagged his concern to the shareholders at its maiden
annual general meeting after the merger came into effect from 1 July.
Funding concerns arise after a $40 billion merger between HDFC Bank and HDFC.
HDFC Bank seeks forbearance from RBI but faces challenges with Cash Reserve Ratio (CRR) and
Statutory Liquidity Ratio (SLR) requirements.
HDFC Bank’s merger may impact Net Interest Margins (NIMs) due to increased low-interest yielding
housing loans.
HDFC Bank aims to return profitability to historical levels in 18 months.
HDFC plans to raise ₹50,000 crore from bond issuances for liabilities management.
HDFC scrip closes down at ₹1,619.05 on the BSE.
3 Likes
ashit 553 September 19, 2023, 7:18am
Investor day recording

Merger related nitty-gritty discuss in detail
Final minutes intersting view of management why they let go large corporate deposit client
4 Likes
Surender 554 September 20, 2023, 3:50am
Surender:
444946 505611 As a rough estimate, eliminated 21% of HDFC Bank’s Equity from the combined
Value of FY23
I was outfoxed in anticipating the combined BV, which is now published officially in the latest presentation
- Link. However, even the big fish like Nomura seems to be in a similar situation:
Nomura downgrades HDFC Bank, cuts price target citing four

negative surprises
Nomura has cited four negative surprises post the mega HDFC Bank-HDFC
meger behind its downgrade. Find out what are the four.
Disc: Hold position in family account.
Kuldeepjadeja 555 September 20, 2023, 4:21am
Nomura is absolutely right…

The old so called PSU banking era is over ! Why pvt banks become bigger without applying any
considerable efforts, is because of PSU banks.
PSU’s loss is Pvt’s profit. They have looted the nation in many ways. Todays wealth distribution gap is gift
of this guys(pvt banks).
If u see the banking sentiment in the country has changed very slowly and progressively. See last 2 3 yrs BS
of PSUs. You will find they have done tremendous job , and story continues…
Who will be the biggest loosers of psu’s gain off course pvt banks.
And the sweetest credit cycle is just started, if any black swan event not comes then psu’s will be much
more than their current levels.
So the money completely shifting from large pvt banks to PSU basket.
Disc. Invested in canara and jk bank.
10 Likes
Mayank.mail 556 September 24, 2023, 8:17am
This Article from Morning Context (June 2022) captures some of the issues which might be playing out
now (read the investor concall HDFC management had recently and the share selloff since then)
“Is HDFC’s merger with its subsidiary a bailout plan?”
Read more at: Is HDFC’s merger with its subsidiary a bailout plan?
2 Likes
hnk_so 561 September 29, 2023, 3:00pm
The attrition is problem for all banks:
Why major banks continue to face high attrition

Banking bellwethers, who account for over 30 percent of the sector’s
workforce, tackled 26 percent attrition and raised their collective headcount by
16 percent, going by data from staffing firm Xpheno.
1 Like
keeyes 562 September 29, 2023, 3:17pm
Attrition is not a new problem especially in the private banking and nbfc sector. One of the reasons being an
appraisal and target based performance management system is in place unlike psu. For years I have noticed
RMs and Sales associates switch banks in 2 years time failing to meet aggressive deposit, loan targets.
Whenever they move, they make efforts requesting the customers served by them to switch to the new bank.
Many of you who received such cold calls should be able to relate.
3 Likes
gsapte 564 October 1, 2023, 2:33pm
Pressure to sell banking products which are not at all suitable for the customers seems to be the reason
behind high attrition rates in all the banks.
If you try to sell unwanted and unrequired products like personal loans, home loans, auto loans, fancy credit
cards to people who are above 50+ years of age, then Why they will buy such products? Can the person who
is 50+ will take a risk of taking huge auto loans, home loans and personal loans when their job is already in
danger to some extent? Most of the people in India today have the constant pressure of job loss after age of
45 itself. Banks target these people for selling high interest rate loans, which is of not much use.
I believe that, HR departments of Banks should set realistic targets which can be achieved in today’s
uncertain environment (of massive lay offs in few industries like Airilnes, IT and high inflation), and have
some mechanism to reward employees apart from setting targets for them. Employee can be rewarded based
on some other parameters like efficiency, understanding of customer needs, turn around time, apart from
targets, then this attrition problem can be resolved to some extent, else there could be operational risks for
the banks.
(Being from IT industry, I can sense that Bank Managements seem to be moving in incorrect direction…)
7 Likes
royatirek 565 October 2, 2023, 8:14am
Banking sector seriously needs to be disrupted. They keep upselling products to aged and non tech savvy
people.
The private bank people keep lying to customers in branches where things are not recorded.
There are so many social engineering frauds going on to loot the non tech savvy people.
Most of the data of Indians are available publically with their personal detials which is increasing the
incident of fraud. The cases of cyber security does not gets resolved as they are too many and resources are
few.
New age fintech are not doing any disruption. Their target people is mostly different due to their high cost
of funds. All the current fintechs that I see are after giving loans to people at high interest rate instead of
solving any meaningful thing. Collections at these fintechs employ all unethical tricks that you can think of.
There is proper case of disruption that needs to be done.
My guess is with the advent of large language model like chatgpt who can guide people over calls and while
talking to any person will solve most of the upselling and frauds. It can also summarise long legal document
of the bank. The bank other earnings needs to go.
Disclosure: Recently visited Axis bank branch. Have some experience in fintech in personal loan division.
6 Likes
gsapte 567 October 2, 2023, 8:28am
royatirek:
Their target people is mostly different due to their high cost of funds. All the current fintechs that I see
are after giving loans to people at high interest rate instead of solving any meaningful thing.
Collections at these fintechs employ all unethical tricks that you can think of.
There is proper case of disruption that needs to be done.
My guess is with the advent of large language model like chatgpt who can guide people over calls and
while talking to any person will solve most of the upselling and frauds. It can also summarise long
legal document of the bank. The bank other earnings needs to go.
Disclosure: Recently visited Axis bank branch. Have some experience in fintech in personal loan
division.
Yes, there is lot of mis-selling happening in all banks today. Most of the times, it seems that, Banks do share
private data of the customers to third parties and it reaches fraudsters easily. This is evident from large
number of frauds happening in India which is unheard of in Developed Nations. This is very serious issue
since I have worked in Cyber Security practice of large IT company, I am aware about this.
This is one of the reasons I do not personally use credit cards to pay bills, as Billers can misuse the credit
card data though it is supposed to be masked or encrypted.
I agree that, FinTech industry has not solved the problem of cyber frauds in India and This is one major area
which looks complete re-look.
2 Likes
RG477 569 October 2, 2023, 1:50pm
Sharing an ET piece on HDFC Bank. It’s based on a recently issued research report. While I don’t care
much about projections…
There’s a very important factual sentence in this piece that’s worth taking note of:
“Our zipcode-level analysis shows that HDFC Bank has added branches in areas with limited competition
from private banks. In fact, 45-50% of new branches are in markets where leading private banks, such as
ICICI Bank and Axis are not present,” said the Jefferies note."
To me this shows the willingness of the management to make a bet which is painful in the short term but has
the potential to pay off in future.
Exactly the kind of long term thinking long term investors need to appreciate.
https://www.msn.com/en-in/money/topstories/hdfc-bank-set-to-get-a-boost-from-a-wider-branch-
network/ar-AA1hxDuB
Discl: Interested
23 Likes
rankamoksh 570 October 3, 2023, 3:09am
I like the strategy if bank expanding in rural currently where there is little competition, I also agree of
misselling by bank RM’s I was not aware that banks sell our private data, if yes who and how are they
selling this data, also I think regarding our credit card data if we only use it on some non reputed sites there
is problem of it being used by fraudsters, else all card data is encrypted, using credit cards for 6 years now,
never had a single fraud.
3 Likes
Shankar 571 October 3, 2023, 4:57am
I work in a Bank. The attrition rate in the branch banking side has always been high. The inter bank
poaching is one aspect. The quality of the hiring is also poor, since this is an entry level with a major part of
salary is linked to incentives the hiring teams also do not pick the right candidates,
May people hired realise their interest in other things, go for higher studies, go to selling in other industry,
study in parallel and switch. Further the people who do well carry on a move to a better roles while the new
talent comes in.
I agree there is a need for the Banks to think of this talent pool differently.
2 Likes
I believe that, Banks should start using AI capabilities more seriously than present, to tap the right
customers which are actually looking for Loans and Credit Card products, rather than randomly calling all
customers for marketing Loans & Credit Cards.
Currently Axis Bank seems to be calling every week to sell such products. (This is my own personal
experience and also shared by few of my friends). Here there is scope for massive improvement.
I have seen that, some younger customers who need Education Loans may not get it so it seems that, there is
some gap between demand and supply.
If banks can plug these gaps, they might able to reach correct customer base.
Note : This is general observation and not related to specific bank.

Invested in HDFC Bank since 2011 onwards.
2 Likes
abhishekaddy 573 October 4, 2023, 3:22am
In major rejig, HDFC Bank splits retail loans division

HDFC Bank chief executive Sashidhar Jagdishan has split retail loans into
mortgage and non-mortgage segments, with two group heads and two regional
heads for branch banking, which would be pivotal for liability growth - a key investor metric for the...
Are you speaking about the bank’s RM’s or operational staff in general.
HDFC bank shall have huge data and if monetised appropriately will be really nice, instead of the annoying
calls everyday for loans AI can be really helpful, most of the fintechs that are able to expand rapidly do on
the basis of tech/digital moat, the only issue I find in them is they are focusing on the bettering their tech,
even after the recent updates the app is still poor with frequent crashes and if it can dominate through tech it
will be the most dominant banks in physical as well as digital capabilities.
1 Like
Recently have done a Balance Transfer of LAP Loan from Edelweiss to HDFC and the whole process was
really frustrating, plus other banks are offering better rates like Kotak, but since there is a pre-payment
penalty does not make sense to switch again, as a customer even to get a simple statement for it is really
time consuming, as the LAP was sourced through RM and a way to get a statement digitally is very hard
plus hard some pre payment charges levied by bank for no fault of mine, and took am=lost 1.5 yrs to
escalate the issue and get those reversed, I was assured of 0 processing fees but in the end I had to pay
0.25%, the amount of docs reqd etc it is really painful for a simple Balance transfer but a friend of mine
recently got a Home Loan from Kotak, his experience was a lot better.
2 Likes
AJ41 577 October 4, 2023, 5:22am
Quarterly update
The Bank’s CASA ratio stood at around 37.6% as of September 30, 2023, as compared to 45.4% as of
September 30, 2022, and 42.5% as of June 30, 2023.
I believe the focus over the next 4 quarters shall be on improving the CASA ratio and get it back to about
42-45%.
The numbers looks alright for the quarter considering this must have been a difficult one for the
management to handle with all the disruption caused by the mega merger.
AJ
Disclosure: Brought during the last year and continue to hold. Closely watching the developments.
10 Likes
s.j.saha 578 October 16, 2023, 1:19pm
Q2FY23-24 QUARTERLY RESULTS

HDFC Bank Q2 Results: Net Profit
Rises 50% On Higher Core Income
The bank's net interest income rose 30.2% to
Rs 27,385 crore from a year ago.
Concall
Concall Transcript
d420b35c-488c-4ea9-84ca-6183de7e29f4.pdf
FINANCIAL
5ca5d7b3-12c1-4d8a-b943-61a97e40c0da.pdf
704d63c1-2f25-4324-84fb-0e4afd81b0c4.pdf
ksaravanan 579 October 17, 2023, 2:09am
https://twitter.com/deepakshenoy/status/1713905382115201277
2 Likes
sheekhuj 580 October 17, 2023, 4:55am
There was a lot of apprehension (including mine) about negative surprises emanating from the merger but
the last analyst call and the results and concall from yesterday have alleviated such concerns to a large
extent. The book value per share is ~553 and the annualized rate of earnings per share is ~89. This means
that price to book at current market price of 1540 is ~2.8 and PE multiple is ~17.3 both of which are close to
what they were at the height of the pandemic.
In other words, even after clarity on most aspects of the impact of the merger having emerged, the stock is
trading at multiples (in terms of PB and PE ratios) that are close to their peak pandemic panic values. Is
there something significant that am I missing here?
Disclosure: invested for a long term, recently added more.
12 Likes
Ayshi 581 October 17, 2023, 5:14am
ROUGH NOTES OF Q2FY24 EARNINGS CALL
Management Commentary
Mr. Sashidharan Jagdishan
• 1st result post-merger

• We just consummated one of the biggest mergers without any outside help – this shows the strength of
our institution
• There was an incremental CRR that was announced and this cushion was very very helpful
• Day 1 adjustments to Equity mentioned in the presentation
• Some people mistook it to destroying equity – but they were just timing differences
• About the non-retail book of erstwhile HDFC – this restructuring brought about a spike in NPA…
The accounts are yet current and performing. The bank will not see any loss from this book in the
P&L. Our provisions too are adequate enough.
• Construction Finance: It is going to be an important part of our business. It will grow steadily
from here on. This will help the top line as well as the margins.
• The results showcase the execution capability we are known for
• Deposits accretion of 1.1 lakh crore
• When the liquidity cushion was being built in eHDFC, we decided not to transfer some tickets – and this
is what happened in June – that is why deposits were hit.
• Funding will never be an issue for us.
• Loan Growth: These are high-quality assets. Commercial, rural, MSME or retail – all are extremely high
quality books. 4.9%, annualized 19.6%
• Very strong, very healthy numbers – bank will have the energy to grow at this pace
• Mid-September presentation mentioned a possibility of 25bps impact on NIMs for making the
cushion. We are therefore, currently at the lower band. With time, we will recoup some of those
margins. Especially with the changing mix towards retail.
• RoA: Maintained around the 2%, and RoE at the 16.2%. Therefore, topline growth and profitability is
intact and will grow now onwards.
• We did the highest ever mortgage loan disbursements ever. We will now start to sweat the distribution
system – along with digital bundling of products.
• The innate strength of the company is strong, we have demonstrated this year after year
• We are excited about the future
Mr. Srinivasan Vaidyanathan
• Macro Context: Good healthy tailwinds. Push from government through Capex.
• Key Logistic indicators were good. The environment is good for robust growth.
• Our estimate for GDP growth is 6.3%
• Key factors in the bank’s growth journey: Overall 10,436 branches increased YoY
• eHDFC branches we are working on building books of HDFC bank from those locations.
• 2.7 million liability relations added in the quarter
• Granularity and deposit focus continues.
• Term Deposits have been the bedrock of this growth. 7.6% growth sequentially.
• Retail accounts for 72% right now and this is our increasing focus.
• CASA was impacted due to merger
• We continue to pursue our tech foray. 3 million registered users on our app.
• Balance sheet remains resilient. CAR is at 19.5%. Core NIM was at 3.65%. Reported NIM was at 3.4%.
• Other income 10,708 crore – 65% is Fees and Commissions.
• Op Expenses 15399 crore represent Cost to Income at 40.4%.
• GNPA was at 1.34%. 22bps related to restructured account – which are current and performing
but are classified as NPA
• Slippage ratio is at 33 bps
• 4500 crore of recoveries and upgrades in the quarter
• PCR was at 74%
• Credit Cost Ratio was 49 bps compared to 87 bps YoY. 34 bps net of recoveries.
• EPS (standalone 21.2) (cons 22.2)
Q&A
Mahrook Adajania – Nuvama
Q: On Margins, you’ve explained ICCR…but will there be any other adjustments while moving from IND-
AS to IND-GAAP?
• We’ll have a session for IND-AS and IND-GAAP to explain it all

• There are a lot of differences that happen
• Profile of the balance sheet and interest rate structure are no longer comparable – there is a different
regulatory regime
Q: So is most of the margin from excess liquidity and ICRR?
• The balance sheet is funded with debt

• Debt borrowing comes at a cost of north of 8%
• That is a part of merger management
• But when you think where it reflects, it is in the Cost of Funds
Q: There was a favourable decision in the tax rate…so does it normalize to 25% in the next quarter?
Yes. We will be at around 24.5
Q: How long would it take for the margins to come back to the 3% levels?
Utilization of better mix - focused on retail will help us bring it to normal levels.
Kunal Shah – Citi Group
Q: The Rundown in wholesale portfolio…is it largely done? As you said we should now be seeing growth…
• It has got 3 components

◦ Construction Finance – we want to grow this portfolio
◦ LRD book – Is also a growth oriented book
◦ Corporate Loan Book – We will take a decision about overall exposure. But direction is towards the
better.
Q: Any one-off impact due in Fee Income due to IND-AS transition?
• Fee income is at normal level

• This is from multiple products but there are seasonalities – it goes up or down
• But historically, it is in the mid to high range
• This quarter it was at 19 odd %
Parag (Inaudible)
Q: Will there to be a 2% hit to growth rate? As you had said before …
• Growth rate is underpinned on 2 things

◦ Market Rate of growth from 10-12%. Depending on the growth. Nominal rate of growth x 1-1.1
will be our growth
◦ We have delivered a premium on the market rate of growth
• There is 400 bps growth in market share gain
• If you look at recent times, market share gain is faster than it was 5 years ago as opportunities to
gain more market share are available.
• If you look at 2 years ago the cohort of branches we could see that breakeven happens in 2 years. As we
add new branches, that is the average you can expect as it follows the scripted method ahead.
• For every 10 bps credit cost of opportunity from the timing point of view, it is about 1-2% of Cost to
Income. As we make those investments, it will start to pay back.
Q: Till last quarter everyone was concerned about how you will fund. But going ahead, will listing of
subsidiaries provide some value and funding?
When the timing is appropriate we will consider an appropriate valuation and let you know.
Atul Mehra – Motilal Oswal
Q: In terms of non-retail NPA, how much was un-anticipated and what was anticipated in the swap ratio?
• If you look at this book from a 6 quarter PoV, it has been on a decline. Go back to the June’22 quarter it
was flat, post which it has been decreasing
• We want to grow this book, but before we do that we need to assess exposure for stability and to balance
the risk
• We are currently comfortable with the provision coverage and the book is strongly positioned
Q: Did any incremental stress come as a surprise? Or was it already anticipated?
• Risk assessment is a dynamic process

• And it is a continuous process. It keeps changing.
Suresh Ganapathy – Macquarie
Q: 83-85% of the book is retail right? What is the comparable Basel 3 number?
• Yes
• But basel classification is different
• There is no 1-for-1 retail definition
Q: About the he synergy itself… counter share has gone up to 70% already, so what is the qualitative aspect
contributing to this, can you some give light on that?
• We have focused on a few things. Engagement level has gone up significantly.

• The process itself. The sales process is significantly enhanced.
• Process has to be broad based across the country and that has already begun.
Q: Can you quantify the LCR on a merged basis? And retail deposit # on a LCR basis of HDFC deposits?
• 121% after absorbing the ICRR

• There is no special tracking now, it is all part of one
Q: In terms of conversion to repo-linked loans…?
• That all has already been done

• December deadline if for customer communication
Rajeev Pathal – G3 Holdings
Q: There has been a 3% hit on the margins due to ICRR, will it start getting normalized from the next
quarter? Do you think 4-5% growth in loan book is possible?
• We don’t give forward looking guidance

• We did allude to the margins and merger management – it has been long-term debt funded
• It will take some time.
• Better mix, and higher yielding retail mix will help us get there
Kiran Engineer - CLSA
Q: What are the SLR Issues as of Quarter-end?
We don’t say what it is, but we can say that we can carry more than that number.
Q: On branch opening, why is it subdued, and why is always back-ended?
• You ask a very important question

• 1st thing that goes in is the marketing team – to decide the location
• Followed by the credit team which maps the geography to potential for advances as well as deposits
• Our branches are 4.5% of country’s branches
• Our deposit margin share is near 10%
• We see the potential in the catchment area
• Then Infra team will say if they can build or not build it
• We know where we want to open the branches, but availability of the right space is a constraint.
• Then we go through this process and bunch it up. As much as we like it to be even through the year, but
there are other constraints. And this is like a machine. The prep that goes in leads to a very long lead that
goes in. Therefore, it is sort of cyclical.
Q: How much of slowdown is market-led?

• Market is under-penetrated
• Our pre-approved personal loan rate is high and demand is good
• We are at a 15-15.5% growth rate. Sometimes it is higher, currently we are in this 15% range – as
we go ahead our canvas on personal loans will grow even more.
Q: What is Average cost of liabilities acquired from HDFC?
• Cost of funds is up by 85bps – and most of this is from incoming eHDFC book.
• So you can calculate from what is already available
Closing Comments
• We are available through the next week for any other clarifications
• Please stay in touch. Thank you.
X.
15 Likes
Rushil 582 October 17, 2023, 5:14am
Due to the large base of HDFC Bank, it will not compound at the historical rates of return.
Plus since it is a 100Billion plus valuation, it will be compared with global peers, who trade at much lower
than 2.8x book value.
This is what makes making outsized returns in HDFC Bank (>20%) totally out of question.
Hence this isn’t a very interesting name for most if they are investing in individual stocks I feel.
Better to put money in an index vs HDFC Bank, less tracking to do and almost similiar returns
2 Likes
Jeljo 583 October 17, 2023, 5:56am
Post merger, FII holding now stands at 52%. (Comparable with FII holding in Axis Bank )
3 Likes
sandyinfo 584 October 17, 2023, 8:35am
CASA Ratio has been dropped to 37.6% compared to Last year 45.4%. Is there any comment for this drop?
nikrod12 585 October 17, 2023, 9:12am
HDFC Being an NBFC only had term and bulk deposits, no CASA. So post merger, CASA as combined %
of deposits has gone down.
5 Likes
laxman_sreekumar 586 October 17, 2023, 9:59am
Also in current high interest rate environment people are moving funds from CASA to time deposits
Sidharth_Chandraseka 588 October 17, 2023, 3:42pm
Term deposits are not part of CASA
ValueV 589 October 18, 2023, 6:33am
Thanks for correcting me! So in that case, HDFC bank’s cost of fund should go up in future as there are
going retail term deposit are growing at around 30% pa.
2 Likes
Mayank.mail 590 October 18, 2023, 6:51am
While EPS growth has slowed from 28%+ to just around 11% pre to post merger
June 2022-June 2023 to Sept 2022-Sept2023
The P/B ratio has fallen only from 3.8 to 3
Can we infer that more fall in share price will not be too much…
What could be the next support now that its continuously trading below the 50 and 200 DMAs…
2 Likes
StonePitbull 591 October 25, 2023, 4:55pm
Wasn’t sure which thread this would fit under, here goes.
“Certain components of personal loans are recording very high growth. These are being closely monitored
by the RBI for any signs of incipient stress. Banks and NBFCs would be well advised to strengthen their
internal surveillance mechanisms, address the build-up of risks, if any, and institute suitable safeguards in
their own interest,” said Governor Shaktikanta Das in his statement, adding that robust risk management
and stronger underwriting standards are the “need of the hour”.
Banks see sharp growth in unsecured loans even after RBI
caution
Some banks reported an average 30 percent growth in their unsecured
portfolio in Q2. The central bank has flagged concerns over the increase in unsecured credit.
3 Likes
Though these warnings look good prima facie, the actual implementation matters more.
We have seen that, Assets of large PSU Banks turning bad after such high loan growth periods, and
probably Central Bank does not act proactively in such cases. PSU Banks have seen their GNPA(s) rising
beyond manageable limits in the past decade.
Central Banks should be more careful about PSU Banks rather than Private Banks which are more cautious
in lending practices.
Hope that, this time, Central Banks will be firm in their approach.
4 Likes
gsapte 593 October 30, 2023, 12:59pm
I liked the fact that, HDFC Bank is expanding rapidly in cities as well as Rural areas where other large
private banks do not have a presense.
In fact, when ever you visit remote rural areas, mostly you will see SBI every where. If HDFC bank can
replicate SBI kind of branches in rural areas, it may still able to grow at decent 15% to 20% Book value for
next 5-6 years.
In the past as well, Many analysts have been pessimistic about its growth but it has surprised all by steady
above 20% Book Value growth for 30+ years.
Let use see what happens in next decade. Competition from FINTECH is definitely going to impact its
growth to some extent as compared to past 30+ years.
Disclosure : Invested since 2011. Booked profits from time to time, but keep investing after deep
corrections.
4 Likes
AVB 595 October 30, 2023, 8:51pm

gsapte:
I liked the fact that, HDFC Bank is expanding rapidly in cities as well as Rural areas where other large
private banks do not have a presense.
This indeed could be where the next growth lever exists for the Indian banking sector as a whole as income
levels rise over this decade and the streets could well be underestimating that. But I do feel HDFC and other
lead private sector banks realize this.
sheekhuj:
In other words, even after clarity on most aspects of the impact of the merger having emerged, the
stock is trading at multiples (in terms of PB and PE ratios) that are close to their peak pandemic panic
values. Is there something significant that am I missing here?
I believe it is due to the inertia of human sentiments and thus has more to do with behavioural finance than
the numbers themselves. But for those who are bullish on the bank, the current valuations do indeed look
attractive.
Disc - Invested and biased
3 Likes
raku 596 November 2, 2023, 11:52am
I’m invested in hdfc bank but now i have started to look into peers which are of same size or bigger
compared to hdfc after merger.
hdfc trades at a valution of 16 pe ratio and p/b ratio of under 3 which historically is the lowest it has been
for the bank but once we start comparing it the likes of citi group and bank of america which both trades at
valution of 7 pe and almost 4% dividend yield which makes them significantly cheaper than hdfc bank.
Can someone please explain to me the logic of paying such a significant premium to an indian bank ,i know
we are a developing nation but the bank is already to big and i doubt it will grow at the same pace it has
been growing the past few decades the growth in eps is to early to tell but it has been rangebound for the
past 1 year.
2 Likes
rankamoksh 597 November 2, 2023, 12:56pm
There is recession fears in US plus Indian economy is strong and growth is still expected. Credit quality in
US is about to worsen due to historically high interest rates.
1 Like
Deven 598 November 2, 2023, 3:06pm
Due to growth factor indian market is always costly, you can’t compare international peer with indian one.
Forget about same sector, you should not compare even parent company.
Like uniliver PE is 14 where as HUL is 57

Dominos PE is 24 whereas Jubilant is 140 - likewise.
3 Likes
sahil_bagaria 599 November 2, 2023, 3:31pm
Growth of a bank is very much linked to the growth rate of the economy. By no means we can compare a
bank present in a developed economy VS ours which is still growing at a much faster pace. Hence I believe
the difference in the valuation is justified. There is still a lot more room to grow for Indian banks and just
because size of the book is large does the stop the bank in anyway in capturing the market further.
3 Likes
investor12321 600 November 2, 2023, 3:35pm
There’s a couple of items that lead to the valuation difference.
1. Underlying operations - Indian banks do very little risky businesses around collateralisation and
securitization. Investment Banking and Trading operations are smaller scale and take very little risk.
2. Differential in GDP growth and much bigger differential in credit penetration.
So lower volatility of earnings and larger potential growth - lead to higher sustainable profitable growth.
Underpenetration is also due to lower competition - leads to higher NIMs and ROAs
Also Citi is a terrible example. Mismanaged for 25 years.
Why should HDFC Bank’s cross cycle 15-20% growth and 15-20% ROE be available at 7 p/e?
If you are concerned about 15% growth being too much - at that growth rate HDFC Bank won’t even gain
market share. In the last FY - HDFC Bank garnered a quarter of ALL incremental deposits in the system.
6 Likes
sougataG 601 November 3, 2023, 5:24am
I think the pvt banking players are taking a leaf out of what FMCG guys did back in the late 1990s-2000s.
Back then HUL launched a program Operation Bharat in phases to increase the penetration of their products
in rural India. At the time 70% of the revenues were coming from the urban areas. But rural markets were
growing at thrice the speed of urban markets. Now we know how those efforts paid off for the FMCG
companies. Something similar may be anticipated in the banking space also. Rapid and deep digitization
could be a cause for worry. A news article I pulled from 2000 discusses the same.
https://www.business-standard.com/article/specials/aim-fulcrum-of-hindustan-lever-project-bharat-
ii-100051001074_1.html
9 Likes
valueinvesting101 602 November 10, 2023, 8:22am
I agree with your concern and had similar thoughts about HDFC Bank. Citi and BoFA both are most likely
to outperform HDFC Bank shares going forward especially when returns are measured in dollars.
Banks in US such as Citi, BoFA and bunch of others are trading at very low valuation due to recession fears
and other factors but once these clouds clear they can deliver 30-50% return in short time.
Premium valuations for HDFC and other Indian banks will be in question as economy opens up more
leading to more competition and these big banks get compared to global peers. HDFC bank’s return for last
5 years haven’t been that great especially when compared in the terms of dollar.
High multiple stocks in India will be in question once compared to similar global companies. Investor can
make good money when multiple expansions is combined with rising profits but stagnating profits or even
slowly increasing profits can lead to multiple compression.
1 Like
Ketan_Chheda 603 November 10, 2023, 9:42am
Couple of points because to which HDFC is not apples to apples with Citi and likes:
1. Citi is pretty much a global financial institution unlike HDFC. It is exposed to multiple country specific
risks. In bad times, Citi is more vulnerable I feel.
2. Citi also would have more risky operations (which we saw during GFC what these FIs are involved in),
which HDFC is generally not involved.
3. Citi also would have investment banking operations which HDFC is not involved in.
So while due to the size HDFC will get compared to the global giants, however I feel there are significant
differences in businesses and hence valuations should be different.
Having said the above, I feel we should not be anchored to the historical valuations of HDFC Bank and
expect that there will be mean reversion. Going forward the average valuations could reduce.
Disc: invested
6 Likes
ahmed 604 November 10, 2023, 10:34am
I agree with @Ketan_Chheda

I don’t see any reason why are we even comparing banks of a fully developed country (which is on the edge
of recession) with a bank of a growing country where recession chances are almost zero.
Pardon me in advance, if I go by this logic, I won’t be able to invest in India as almost everything is
expensive if compared to their peers in foreign developed countries
Even if we compare HDFC with foreign banks, it indirectly means HDFC will have more space to grow in
other countries.
Last 5 years avg PE of HDFC is 23.7 but currently, it is at its lowest PE i.e 16.8. It means profit has grown a
lot but the price is not moving. We might see something close to the next ITC here.
Disc: Invested
7 Likes
raku 605 November 10, 2023, 11:43am
Unfortunately this is the harsh reality to me eyerthing in india seems expensive and all time high interest
rates doesn’t help either .
I know i might loose money not buying stocks at current valuation but i’m ok with the letting go of the fear
of missing out ,i would rather not loose money if there is any change in theme of india being the next
growth story or the next china or for whatever reason our markets are so expensive at the current moment(I
have burned money in the speciality chemical cycle and china plus1 theory which was going on during
covid)
I’m invested in hdfc bank but i would not feel comfortable holding as a long term bet as any meltdown
within finanial market will have a effect on hdfc bank as well as most of the holding is by FII.
1 Like
gsapte 606 November 10, 2023, 12:53pm

While we can compare HDFC Bank with Global peers, we may also have to consider reasons behind the
low valuations of Global peers:
1. Very low GDP growth in the past decade. Even though this is on high base, but still recession fears were
there during this period where as in India, at least recession fears may not be there.
2. Per Capita Income in India is one of the lowest in the world (around 2100 USD) which is lower than
Asian peers. Though this is Negative but at least it may not go down further. In fact it may go up in next
30+ years and thus Financial investments may go up. Lot of efforts will be required at an individual level
to uplift large population out of poverty and also to ensure that Per Capita Income should at least become
comparable with Asian peers. Only then Banks can grow, along with MF(s).
I am particularly worried about this very low Per Capita Income in India and I believe that, large amount
of efforts are needed at an individual level to lift our income ahead of Asian Peers. When income goes
up, only then Banks will grow faster than Global peers.
3. Risk taken by Global banks might be higher due to their exposure across the world, which may not be
case with HDFC Bank. This may change in future as they may like to expand outside India.
Though there are lot of Negative factors which may ensure that, HDFC Bank will find it difficult to grow
beyond 15% but still this growth rate looks good. There have been negative views about HDFC Bank during
my investment from 2011 but almost all the time, it has surprised investors positively. Let us see what
happens in next decade.
Views could be biased as invested in HDFC Bank.
9 Likes
StonePitbull 607 December 22, 2023, 7:07pm
ahmed:
Last 5 years avg PE of HDFC is 23.7 but currently, it is at its lowest PE i.e 16.8. It means profit has
grown a lot but the price is not moving. We might see something close to the next ITC here.
Can average PE still be looked upto even after the base has grown so much?
I feel the street might be estimating asset quality to deteriorate slightly in the upcoming quarters so they
have started to discount private banks. But hey Banks are back to their ATH again probably because of
RBI’s proactive moves.
1 Like
ahmed 608 December 23, 2023, 11:05am
I have been reading posts regarding the HDFC base or market cap being so huge that it can’t grow further.
One question comes to my mind, what’s stopping HDFC from growing, market cap is just a number. India’s
population is 1.4B and a bank account is a must in today’s world, do you really think 1.4B people have a
bank account in India, I don’t think so. Plus, nowadays people keep more than one bank account. HDFC
Bank is the private sector leader, people always prefer the leader even in our day-to-day life if it’s not damn
expensive.
After the merger, HDFC Bank provides everything in one place i.e. Demat, Home Loan, Vehicle Loan,
Personal Loan, Saving Account, etc.
India is still a growing country, we are damn far away from the “developed country” tag. I don’t understand
the economy well but one thing is for sure the finance sector will be the most beneficial sector in a growing
country.
I’m not sure what exactly is deteriorating but it’s a life cycle of all companies I don’t think that should be a
concern.
In the end, it’s all about with whom you are comparing HDFC Bank
• If you are comparing with other large caps in India, then HDFC Bank will do better.
• If you are comparing with global banks, totally illogical comparison.
• If you are comparing with small-mid caps then obviously HDFC bank won’t be a multi-bagger in the
next couple of years but we might see a sudden jump to give it a fair valuation.
Dis: Heavily invested (> 10%) through MFs (Index Fund + Parag Parikh Flexi Cap Fund)
4 Likes
sivaram 609 December 23, 2023, 11:49am
ahmed:
India’s population is 1.4B and a bank account is a must in today’s world, do you really think 1.4B
people have a bank account in India, I don’t think so.
Well, they have. as per RBI, 98.3+% of the population now have a bank account due to PMJDY and the
India stack requirements.
2 Likes
ahmed 610 December 23, 2023, 12:01pm
Could you please share the source of this info?
sivaram 611 December 23, 2023, 3:52pm

This is from 2017-18, at 80%; you will find news reports with varying numbers but it has crossed 90%
which is why fintech firms are the rage now. Also UPI numbers.
sivaram 612 December 23, 2023, 3:55pm
Remember there will be some population that will never have a bank account given poverty levels, which I
would peg at 100M. Looks big but on 1.4B population, that’s spread across such a large geographical area,
pretty much that’s all we can do.
sharath23v 613 December 23, 2023, 4:00pm
Think about the rising income level of Indians which contributes to the deposits. Spending/Premiumization,
need to buy homes etc will be more as the income grows. So banks will continue to rise.
In future if more profit can be used for buybacks etc then share price will be automatically taken care.
1 Like
keeyes 614 December 23, 2023, 4:11pm
We have to take this with a pinch of salt. The average age of Indian population is still below 40 and if very
house hold is a 3 to 4 member family, most kids definitely will not have a bank account
Secondly most Jandhan accounts will have zero money and they will queue immediately to withdraw
anything deposited through various government schemes
CASA and the average money per account can be a good metric
As the standard of living and per capita increases this will naturally go up
3 Likes
@sivaram , thanks, I was not aware of this percentage. But as other friends mentioned it won’t impact
much, we still have more space to grow like growing population and other products of HDFC Bank +
people literally keep more than 1 account. I have 3 bank accounts.
I would like to highlight one thing, a lot of the accounts were only created just to activate UPI txn like
Paytm payment bank. Most of these accounts literally don’t deserve savings account tag.
gsapte 616 December 23, 2023, 4:59pm
As per latest report in many news papers, more than 20% to 25% Jan Dhan accounts are non operational.
Probably those were opened some time back but never used.
I personally believe that, there is huge population growth which will happen in next few decades, and more
population will need to still open Bank accounts. With per Capita income in India at 2500 USD (number
looks inflated to me!) as per some recent news, there is immense scope that this will slowly go up as well.
HDFC Bank may surprise all of us by growing at reasonable rate for another 10 years, and with Valuations
moving toward its Mean which is above 4.0 P/B, there is enough scope for the stock to grow.
Companies which are 10-15 Lakh crore in Market Cap today can still become 2-3 baggers going forward, if
the economy grows from current levels to about 10-15 Trillion Dollars. Our large caps are equivalent to Mid
Caps of USA / China, so I do not think that, Large caps can not grow.
Many large caps have still potential to become Mega large caps.
Disclosure Holding HDFC Bank since 2011. Booked profits from time to time but planning to hold for more
time. My views may be biased.
4 Likes
I have attempted to estimate Stock Price of HDFC Bank after 5 years, based on my analysis.
Since I am holding HDFC Bank since 2011, I believe that, Bank can still grow its book value by around 10
to 12% conservatively.
If Market rewards the bank after 5 years by increasing its P/B to 3.5 from current P/B of 3.0, there are
various possibilities.
I have assumed that, it may be difficult to expect past 10 years book value growth since I am assuming that
NPA(s) may rise and hence Book value after adjusting NPA(s) may not grow as fast as last 10 years.
Considering that, HDFC is now merged with HDFC Bank, there is likely shrinkage in NIM and also
possible increase in Gross NPA(s). It may not happen but I have considered conservative picture.
Following could be the worst, most likely and best case scenarios:
Keep in mind that, 10 Year Median P/B is 4.0 but I have considered Exit P/B of 3.5 (as conservative
approach).
So there is a possibility to see reasonable 11 to 14% Price CAGR here.
Note : In real life, these estimates may or may not work as things are changing and competition from
Fintech is also increasing. This is not a buy/sell recommendation.
I have assumed simple scenario. Actual scenario will be complex if there is share buy back, Fund raising via
various routes in which case book value growth would be different.
9 Likes
sivaram 618 December 25, 2023, 5:58am
A lot of people on bank accounts creation are missing the point discussing number of kids, operative
accounts and such. What matters is, the infrastructure for scaling up is in place for fast transmission of
money. Are banks intermediaries and gate keepers of these transactions? Yes!
Digitisation of banking services has helped banks to be more prudent in their lending. They can see you
financially, if your PMJDY accounts are not active, net zero etc. The question more appropriate to ask is, is
HDFC leveraging this to become bigger, better and faster.
I really don’t think so. Note that I’m continuing to accumulate this stock.
StonePitbull 619 December 25, 2023, 8:49am
ahmed:
India’s population is 1.4B and a bank account is a must in today’s world, do you really think 1.4B
people have a bank account in India, I don’t think so. Plus, nowadays people keep more than one bank
account. HDFC Bank is the private sector leader, people always prefer the leader even in our day-to-
day life if it’s not damn expensive.
In 2023, banking is near full penetrated market. There will still be growth due to rise in population.
I don’t think people who use multiple bank accounts (yield chasers) use HDFC as secondary account, as
their interest rates on deposits are always conservative.
HDFC Bank still has this engine/track record of growth with potential to propel quality growth over the
years, 10-15%, till it becomes so big that law of diminishing marginal returns kick in.
1 Like
My newest savings account was HDFC and it is my primary account. I’ll always trust/prefer the sector
leader for large amount( more than 4L) of Fixed deposits( percentage wise it might be a small percentage of
someone’s portfolio). They give 7.2% on deposit, I don’t think it’s conservative.
There is a craze of small finance Banks giving upto 9% interest. Don’t worry, just wait and watch, some of
these small finance banks will go bankrupt then people will understand the value of sector leader.
We can leave penetration topic, it’s very subjective. It’s a long debate topic like is this penetration actually
real or shallow.
Note: I’ll also prefer SBI but I hate their services.
3 Likes
@ahmed Your observations look useful.

Currently many large banks are not offering even 7.2% interest, so this is a reasonably good rate.
People still prefer large systemically important banks like SBI, HDFC Bank and ICICI Bank as their
primary banks and then generally consider other banks. Many of my friends in IT and Non IT industry have
accounts in SBI and/or HDFC Bank.
Conservative lending practice of HDFC Bank will help them to grow in difficult times, and so far they have
maintained their Gross NPA(s) below 1.5% for almost 3 decades. I believe this is the primary reason of their
steady growth.
Episodes like Yes Bank and Many other banks having Gross NPA at much higher levels will face difficulties
when the credit cycle turns around and the bad loans goes up.
Hence banking business is very tough business to do, and prudent lending practices are necessary to survive
for very long period.
1 Like
sujay85 622 December 26, 2023, 10:49am
sujay85:
PayZapp app of HDFC Bank … new interface is snappy, clutter-free and pleasant…This is the first
time I got this feeling that the new tech team is doing it fine. Good mobile and net-banking experience
could be essential for retaining and engaging customers and attracting tech savvy populace. So, I am
pretty happy as a long time HDFC Bank shareholder.
HDFC Bank is doing a great job with the PayZapp app.
1. Interface is clean and modern.

2. There are rewards for bill payments, recharges and UPI payments. So, HDFC is spending bucks to
acquire customers.
3. They are pushing their UPI Rupay Card (not lifetime free) through this app and also asking users to get
savings account. So, customer acquisition through app is also ongoing.
4. Customer service is also very responsive and can be accessed through the app.
5. I have seen PayZapp UPI Scan & Pay QR at some marchant shops.
6. App has many features which has been mentioned in the newly released YouTube video.
https://www.youtube.com/watch?v=KbBm62jiGnI
7. They have made made advertisements with Tiger Shroff, Kapil Sharma & Prabhu Deva. So, they have
seriously heightened their promotion game too.
https://www.youtube.com/watch?v=YMQq6IlWHeA
https://www.youtube.com/watch?v=WNYu0UOxtJw
https://www.youtube.com/watch?v=Rk25yErlZqM
4 Likes
rankamoksh 623 December 26, 2023, 2:13pm
I am an HDFC customer it has one of the worst digital banking app and netbanking, I am very disappointed
with their service even being an Imperia customer service is very bad, I also have a current account and
LAP at HDFC, I have recently shifted to Kotak as my main banking app is very nice, their demat interface
is also too good, I think as an investor in the past HDFC bank has delivered consistent performance is
primarily I think due to its RM led model but nowadays atleast genz people have become smart and know
that in the name of helping you manage your money they just want to sell ULIPs and insurance also HDFC
bank is there in my society and I know the employees informally as well, they are very candid and are
actually under a lot of pressure to meet targets, I personally think this consistency of the bank is because of
its stringent targets to employees but in the end it just leads to mis-selling, if they use technology, they can
be a much better bank which could keep its employees as well as its customers happy.
I like the bank’s strategy to open branches in rural areas but when it comes to digital banking it is still miles
behind other banks.
5 Likes
True, their mobile banking app is not the best. All the pain point or mis-selling you mentioned are practiced
by all banks (For proof, you can search bank name on Twitter)
rankamoksh 625 December 26, 2023, 2:42pm
I think it is more serious in HDFC because as far as what I have heard if targets are not meet they lose their
job, my RM in HDFC shifted to Kotak for a lower package as he just had a kid and wanted some work life
balance.
2 Likes
Vego 626 December 26, 2023, 3:35pm
Markets are comparing an Apple to an Apple, and now we will have to wait for next NPA cycle to see who
has done a good job at risk management.
Presently the PSU and Pvt banks are VFM.
Comparing historical BV is good way to start, we have to see what would the Mean banking valuation be
for any well managed bank.
Perhaps someone can derive what will be the average BV for top 5 pvt banks in next 5 years would give a
good learning
Professionals leaving banks is common now-a-days. Many banks have reported high attrition rates in last
Annual Reports.
This is a major area of concern, as senior professionals leaving for such reasons like high stress and nil work
life balance can create operational risks to well managed banks.
This is common area of concern for investor in banks. IT industry goes through this ritual of firing people
after every 4-5 years which does not create a good impression about IT companies. This trend seems to be
now catching up with Banks.
Some of these reasons are good enough for Mr. Market to give lower P/B multiples for private banks going
forward. Toxic work culture often leads to frauds, wrong practices and reduced productivity.
Having said this, Banks is general will remain a long term growth story in many nations which are still
growing with rising population.
Above statements are my general observations and nothing specific to HDFC Bank.
(I will remain invested in HDFC Bank as of now.)
2 Likes
sougataG 628 December 27, 2023, 4:53am

RBI has taken note of the high attrition levels in banks. D- Invested.
RBI takes stock of high attrition in private banks - The Hindu BusinessLine.
1 Like
Subhadeep 629 December 27, 2023, 5:14am
The main issue is elsewhere. Post the Merger, the merged entity became the base case. The erstwhile HDFC
could do lot of transactions (especially to Real Estate Developers) as an NBFC. Those deals are not possible
in a Scheduled Commercial Bank. Hence the base needs to be treated as lower as once those loans fall off,
they cannot be replenished. Now if you apply the ratios on that revised lower base, things will look different
and ratios will make sense. Highlighting this subjective aspect. Someone who has the data can do the
number crunching.
Disclosure : Was my highest holding for more than 15 years but completely exited before the Merger on
these grounds.
4 Likes
Mudit.Kushalvardhan 630 December 27, 2023, 6:32am
You have completely exited Banks and NBFC or just HDFC bank? And what else you hold in this segment?
Subhadeep 631 December 28, 2023, 4:55am
Just HDFC Bank. There are no sectoral concerns per se. However I tend to stay away from any Financial
institution with P/B of >3x. Happy to ride if I hold but wont add at those levels. However with regulatory
tightening (maybe for the right reasons) its difficult for any institution to have any serious competitive
advantage over others to justify premium valuations. It will eventually boil down to Cost of Funds,
Technology and good underwriting standards cum execution.
6 Likes
Unknowninvestor 632 January 16, 2024, 3:51pm
Results are out
HDFC Bank Q3 Results: Net profit jumps 33.5% to Rs 16,372

crore; asset...
HDFC Bank Q3 results: The bank's gross non-performing assets (NPA) stood at 1.26 percent, up
from 1.23 percent last year
Jadewade 633 January 16, 2024, 3:59pm
The HDFC Bank ADRs dropped by more than 4.5% today after the Q3 results were announced. Usually not
a good sign. Could be because of NPA or provisions numbers?
s.j.saha 634 January 16, 2024, 5:16pm
3QFY2023-24 RESULTS
HDFC Bank Q3 Results: PAT rises 34% YoY to Rs 16,373 crore,

tops estimates
HDFC Bank reports strong Q3 results, beating ETNow poll. Net profit rose
34% YoY to Rs 16,372.54 crore. NII increased 24% YoY to Rs 28,471.34 crore but fell short of
estimates. Provisions rose to Rs 4,217 crore. Core net interest margin at 3.4%. PPoP...
Snapshot
723fb80a-2dde-42a3-9793-7ae1be57c87f
Conference Call
Call Transcript
723fb80a-2dde-42a3-9793-7ae1be57c87f
Presentation
723fb80a-2dde-42a3-9793-7ae1be57c87f
Financial
ce704155-02ba-43f0-a137-a5f23cce0d75.pdf
1 Like
amitverma21 635 January 16, 2024, 6:24pm
Well mangement is facing issues with Deposits not keeping pace. Thanks to all of you withdrawing money
at placing at the right place . They are constrainted on capital (Loan to deposit ratio is 120 % while they
use to be 85 %). Increasing more branches , they basically made up to increase number of branches. In all
management is not appearing to have all the answers (confdence was clearly missing). Cost to income does
not come with size so not sure how they will growth of 20s.
Disc: No investments in HDFC bank. On my radar.
7 Likes
gsapte 636 January 17, 2024, 4:58am
Loan growth has surpassed deposit growth and Loan/Deposit ratio seems on higher side as compared to last
few years. CAR is also reduced. Ability to raise deposits is going down even after increasing branches in
Rural areas.
Probably it will take some time to reflect in deposits.
These could be the concerns. Also NIM will take some time to go to reasonable levels. GNPA has started
moving up but should not be a major concern.
They have managed to report very good Net Profit growth in spite of all these concerns which is a Positive.
I believe Management may able to overcome some of these concerns but will take few quarters.
Disclosure : invested since 2011 but have been prudent in booking profits from time to time.
4 Likes
AVB 637 January 17, 2024, 9:18pm
Informative content from Ishmohit @Worldlywiseinvestors and on time once more. Kudos! However, I
would contradict the valuation estimates. I would rate the exit PB in 2027 to be as follows (CAGR estimates
are derived from his own modelling sheet):
• Bull case: 3.8 (last 5-Year median PB) = 28% CAGR (Inc Dividends)
• Base case: 3.1 (mean of bull and bear case) = 19% CAGR (Inc Dividends)
• Bear case: 2.5 (lowest ever PB) = 11% CAGR (Inc Dividends)
This seems to be the most reasonable assumption set to me.
Because even if we assume that the current concern of a large base post-merger persists and the stock
suffers a long-term derating, I don’t see it slipping down below the 2.5 mark indefinitely. But from that
same line of thinking, I also feel that investors should taper their expectations and may need to settle in
somewhere between the bear and the base case. I would love to hear opposing POVs on this.
Disc - Invested and biased
4 Likes
VALUE2017 638 January 18, 2024, 2:56am
There may be cockroaches in merged HDFC NBFC entity which has now come into a more regulated
environment. Its very difficult to grow your loan book at past rate with current book size and if you try to
maintain that rate then you are bound to fail. Market is very clever and had anticipated all these thing 3 year
backs because of which there is hardly any return from HDFC stock.
My belief is that with the current size of HDFC we should moderate our growth expectation and
accordingly valuations.
Discousre: Invested with tracking position
2 Likes
Vivek_Santhosh 639 January 18, 2024, 3:16am
They mentioned in the concall that they will use infra bonds issued to offset affordable housing loans in
their books and that will reduce psl requirement, doesn’t any have any info on how that mechanism works?
1 Like
ashishjp 640 January 18, 2024, 3:37am
What is this story surfacing about 1200 cr added to increase the profit margin ??
My take on the results

They were slightly disappointing mainly because of the margins, despite exhausting their excess liquidity
they margins remained flat
I think this is mainly because of a high liquidity crunch in the system, hdfc being such a large bank cannot
get deposit until system liquidity improves, once the casa ratio comes back to 40% margins will improve but
I feel it won’t easily go back to 4% plus because of the housing and wholesale loans they’re doing now.
That is also not bad because while top like is lower, opex and credit cost will also be lower keeping the
bottom line similar
In terms of loan quality there is absolutely nothing to complain about, credit cost is very low and they have
such large provision buffers and adjustments that it really won’t be an issue unless something seriously goes
wrong.
My feeling is that things will be tight till June, income tax payment and cash withdrawals for elections will
take liquidity out of the system and psl requirement for 1/3 of the hdfc book start in April. Post the election
the government might start spending and the RBI might inject liquidity into the system, plus the bond
inclusion money will come in and then the margins will improve
Despite the low margins they still managed an RoA of 2% and RoE of 15%, income tax write backs were
mostly used for provisions. Even if it doesn’t rerate, it should give a steady 15% kind of return once things
settle down inline with the RoE
2 Likes
They got about 3000cr of additional gains because they sold Bandhan Bank and got favorable income tax
orders but that was used in1200cr of additional provisions for Aif’s they hold and npa provisions so overall
the benefit from this was very marginal
2 Likes
Rushil 643 January 18, 2024, 4:14am
Another technical factor is that a majority of funds own HDFC Bank and it is a high allocation for them -
having given stellar returns for 2 decades plus.
With the stock struggling, a lot of large cap oriented funds will underperform the Index of they don’t cut
allocation to HDFC Bank. This can also be a headwind in the coming year alongwith weaker growth than
expected
Dis: Sold before merger
2 Likes
dozer 644 January 18, 2024, 5:36am
Hdfc makes around 13% of the nifty index. I don’t think there are many active funds with 13+ % exposure
to hdfc bank. So when hdfc crashes it’s more likely that these funds will outperform the index, not
underperform.
7 Likes
Ruchit_Shah 645 January 18, 2024, 5:48am
A different thought/ pov trying to connect a few things:
Maybe HDFC bank’s deposits growth slowing down not to be attributed to its large size?
Or even Merger?
The last couple of quarters has seen a phenomenon interest towards Equity Markets. It’s obvious to all -
there is data on increase in no of DMAT, MF SIP, IPO craze etc.
Can it be co-related to cultural shift from FDs to Equity?
7 Likes
If i move my money from my bank account to equity, I am buying from someone and when they get the
money it has to sit in their bank account
Only ways liquidity can be removed from the system is cash withdrawals, foreigners withdrawing money,
paying taxes and RBI selling bonds/dollars
5 Likes
Ketan_Chheda 647 January 18, 2024, 8:02am
If you invest via MFs (lumpsum or SIP)…money moves from individuals to institutions…that reduces the
CASA (or deposits) for your bank…all these are various ways how money moves
1 Like
Investor_No_1 648 January 18, 2024, 8:35am
Vivek_Santhosh:
d when they get the money it has to sit in their bank account
Probably they are doing sector rotation
Anecdotes apart, I also have this feeling that lot of financial savings gradually moving to equity from
traditional products amd more so in Urban areas. HDFC is currently more Urban focussed. Someone may
say even IDFC is urban focussed but they are playing different game…
Would be good to see how HDFC Securities performed…
Eventually you buy from someone, be it individual or institution, unless they immediately withdraw that
money and keep in cash or take it out of the country that money will be in the banking system either as casa
or term
1 Like
gsapte 650 January 18, 2024, 2:30pm
We need to also look at Deposit growth at other banks.

If they are also struggling to grow Deposits in line with their Loan growth then this is industry wide
phenomenon. To some extent it could be happening due to cash requirements during certain periods or
people are shifting money to RBI Floating Rate Bonds, Post Office and Equity MF(s). We need to look at
trends of these 3 instruments as well.
Certainly Equity MF SIP has moved up in 2023, so that could be one of the reasons but we can not jump to
conclusions so easily.
I believe that, BFSI sector is going through lean period in terms of Share Price growth. This is also evident
in Kotak Bank. Kotak Bank is doing much better but still their share price is standstill during 2023. So we
need to look at reasons for the BFSI sector as well.
5 Likes
Snowball 651 January 19, 2024, 5:23am
HDFC Bank 3Q results were below expectations, especially on the Deposits collections. Management was
showing confidence earlier that they will be able to garner Deposits at good pace and it didn’t happen this
quarter.
But we should also see how other big banks (esp. SBI and ICICI) fared on deposit collections this quarter to
gauge how bad HDFC performed. If everyone slowed then the problem is less severe (systemic).
I will not be concerned much if we found that everyone slowed, since it means overall banking sector
slowed and when better opportunities come in future then HDFC have good chance to capitalize on them.
But one thing is for sure: the Large base effect has indeed material impact on HDFC Bank. Markets had got
it right earlier and I personally overlooked it. Now I have reduced my long term HDFC returns expectations,
from 17-20% earlier to 12-16% now. I think HDFB bank is still a good investment bet on return-risk profile.
I am not bothered about NIM reduction much. NIM of 3.5 is not bad if they can keep it for long.
Also, I really don’t mind if markets derates HDFC bank further. I will be happy to buy more at P/BV of
2.0-2.5.
Disc.: HDFC Bank is significant part of my portfolio.
6 Likes
Snowball:
But one thing is for sure: the Large base effect has indeed material impact on HDFC Bank. Markets had
got it right earlier and I personally overlooked it. Now I have reduced my long term HDFC returns
expectations, from 17-20% earlier to 12-16% now. I think HDFB bank is still a good investment bet on
return-risk profile.
I would tend to agree with this view. Mr. Market is pessimistic about this stock similar to ITC, Coal India in
2021. If it gets de-rated to P/B of 2.0-2.5, it would be still a good buy and can generate decent 14-15%
returns from that level.
3 Likes
saurabhgupta 653 January 19, 2024, 3:41pm
Market is 20% knowledge and 80% behavior.The same HDFC just 1-2 weeks before was start running and
those who was not invested started to think like FOMO and today when the Market is again giving the
opportunity to buy it,nobody wants to buy but when FII start buying the same stock again and it start going
upward, people again feel FOMO and this cycle keep on going.My expectation is moderate and level 1450
and below is good time for me to start buying this high quality stock in systematic manner and sit
tightly.Good stocks available at good valuations only after a bad news come out and if that bad news is
temporary in nature, i pack my bag to start buying that stock.
I may be wrong and contra views are welcome.
10 Likes
Mudit.Kushalvardhan 654 January 19, 2024, 5:12pm
Since HDFC has become too big, 2nd largest company by market cap, i think, so even if it is bought at these
levels, whats the CAGR return expectations one can have from such a big elephant?
I hold ICICI bank and IDFC First bank…And sold HDFC bank for this reason…
gsapte 655 January 19, 2024, 5:46pm

Mudit.Kushalvardhan:
Since HDFC has become too big, 2nd largest company by market cap, i think, so even if it is bought at
these levels, whats the CAGR return expectations one can have from such a big elephant?
I have done Price CAGR calculations above in this thread.

I have considered Exit P/B of 3.0 and 3.5 and Book Value Growth of 10% to 12%, which can result into
11% to 14% Price CAGR if bought at around 1450 or below.
If we consider Exit P/B of 2.75 then may be returns could be lower than 11% but that seems like worst case
scenario. But it is possible.
I agree that, we should be little cautious considering its large size, but still it could be a good stock to hold
or buy at lower levels for portfolio stability.
I may be wrong in my analysis.
6 Likes
Rushil 656 January 19, 2024, 6:50pm
Why buy individual stock if it gives less than 15 percent returns?

We can buy the index for better return or equal return to HDFC Bank ar this stage
2 Likes
Mudit.Kushalvardhan 657 January 19, 2024, 9:49pm
Price to book has been on downward march in last 10 years as well as last 5 years. In 2019 , PB was around
5 which is urrently at 2.75, I think…so after 5 years exit PE may be around 2 or so. This may give Index
returns at best. Holding 1 stock vis a vis index for same returns will distort the risk-reward equation.
1 Like
Understanding [in my own words] from Q3FY24 Conf. Call:

What’s the main concern? Q3 results hint at upcoming unsustainable growth rate or lower ROA/ROE.
Indicators:
• Elevated LDR [Loan Deposit Ratio]: Deposits [expected retail collections were 50~80% higher] are not
outpacing the loan dispersal | Mgmt.: Lack of liquidity in the system after 3.5 Yrs. RBI driven to contain
the inflation without increasing interest rates | Wholesale funds as source of deposit were passed due to
low profitability - high competition among banks on the basis of rates.
• Bottomed out LCR [Liquidity Coverage Ratio]: Investments and cash on the asset side funded more than
50% of this quarter loan dispersal. Not a sustainable approach. Either
◦ Loan dispersal be slowed [lower growth…Mgmt.: Not tethered to a particular number in a point of time.
However, aspire to maintain past growth rates (double the Balance Sheet size) over a period of time (4~5
Yrs.)], or
◦ Retail deposits must increase
▪ Needs more branches [Mgmt.: Might do 800~1000 by year end instead of 1500, which was the earlier
forecast | Future pace of addition depends upon regulatory mix (rural vs. urban) fulfillment instead of any
hard number]
▪ Offer higher rates as the driver [Mgmt.: Not a preferred path at the cost of profitability - Lower NIM/
ROA/ROE]
▪ CASA growth [Mgmt.: Needs to inch upwards with time]
• Higher amount of non-recurrent earnings: Tax writeback, RBL share sale etc.
To decide further course of action, each investor shall ponder upon:
• Is this a temporary phase compared to one’s investment horizon?

• What levers bank has to come out of this situation? [Retail mix [Unsecured in particular], CASA
improvement, higher mortgage share, cross-selling of products etc.]
• What’s the alternative opportunity?
10 Likes
Investor_No_1 659 January 20, 2024, 5:16am
Surender:
Elevated LDR [Loan Deposit Ratio]: Deposits [expected retail collections were 50~80% higher] are not
outpacing the loan dispersa
This looks liks issue was not with deposit increase but rather loans increased at much higher pace?
If CASA growth is decreasing as compared to other banks, what is the root cause?
With more branches, intention is to increase deposits further but should a bank of such quality start doing
that when they need it the most?
I mean, in banking, the quest for deposits should preceed loan growth or vice versa?
From whats going on it seems bank is not fully prepared yet of the tremendous loan growth which lies
ahead…Is that a good thing or bad? Good because existence of such growth or bad because this growth is
catching at wrong foot as liability side may not be prepared?
Pls correct me if my understanding of the root cause is wrong here? Thanks

Mudit.Kushalvardhan:
Price to book has been on downward march in last 10 years as well as last 5 years. In 2019 , PB was
around 5 which is currently at 2.75, I think…so after 5 years exit PE may be around 2 or so. This may
give Index returns at best. Holding 1 stock vis a vis index for same returns will distort the risk-reward
equation.
Yes. In case of INDUSIND BANK, HDFC BANK, KOTAK BANK, the Median P/B is above 4 for past 10
years and now it is moving down in the past 5-6 years.
Premium Valuations which these banks had enjoyed during 2010-2020 has been de-rated by Mr. Market.
Where as ICICI BANK and SBI are trading above their 10 Year Median P/B. Axis Bank is trading close to
10 Year Median P/B.
This happens generally when banks like ICICI BANK, SBI, AXIS BANK start reporting Lower GNPA/
NNPA and they get re-rated by Mr. Market. This has happened to some extent before 2012 as well.
When Mr. Market starts believing that, Banks have cleaned their books and Now their GNPA will remain in
control or reduce, then its starts giving higher P/B to such Banks.
Also, this means that Market is not happy about KOTAK BANK and HDFC BANK going forward. Hence
they have de-rated them.
When credit cycle turns around, and GNPA starts rising then this trend reverses or can reverse in future. It is
difficult to predict whether KOTAK BANK and HDFC BANK will maintain their GNPA at current levels or
not. If Yes, they may get rewarded by Market and P/B can move up or will remain close to 2.5 or 3.0.
We have to wait and watch for next 5-6 years for that. Till that time, every investor can build their own
judgement on this and either remain invested in these 2 well managed banks or can switch to other large
banks.
I have not considered IDFC FIRST BANK as it has limited history.
4 Likes
sambandham82 661 January 20, 2024, 7:59am
@Mudit.Kushalvardhan
Apple mkt cap in 2010 was 100 billion$

In 2020, it was 1 trillion$(10 bagger in 10 years)
A person who do not buy Apple share assuming that “elephant cant grow”, missed the opportunity to get a 3
bagger in the next 4 yrs. Now in 2024,its mkt cap is 3 trillion$.
There are many such examples in stock market. Any giant cap possess same story.
As long as the company is in the right country, run by right management, holds/grows customers through its
brand value, company continues to grow at reasonably good rates.
HDFC bank is one such financial conglomerate. At 16 PE, its a steal.
25 Likes
sambandham82:
As long as the company is in the right country, run by right management, holds/grows customers
through its brand value, company continues to grow at reasonably good rates.
HDFC bank is one such financial conglomerate. At 16 PE, its a steal.
I would tend to agree with you. In fact, my investment experience suggests that, when many people are
having pessimistic view on the stock and stories are being floated saying that, now this stock can not grow
as the best days are over, it is time for Value Investors like us to start looking at it more seriously.
Since I am already invested in HDFC Bank unable to increase my position, but I have taken a position in
Kotak Bank during 2022-23 since it is also being available at reasonable valuations in my opinion.
Many investors were pessimistic about HDFC as well in 2014 and were chasing Mid Caps which got
hammered during 2018-19 and HDFC was the good stock to own at that time since they listed HDFC AMC
and HDFC Life Insurance, but many were pessimistic about it in 2012-13.
Another such example is ITC and Coal India during 2021-22. When negative stories are floating generally it
is time to buy if you have your own investment thesis and conviction.
13 Likes
sougataG 663 January 22, 2024, 6:29am
Agree with you. Unable to increase my position in the bank as it is already one of my largest holdings. But
have seen this pattern playing out again and again. Back in 2017 TCS & IT pack were underperforming and
many stories floated. In 2021 ITC was underperforming and many stories were floated. Now it is
HDFCBK’s turn. D: Invested & Biased.
3 Likes
Value Punks has covered this topic in their latest article.
HDFC Bank: An Update

....and a few lessons from ITC and other Compounders
This pattern of negative stories being floated is repeated pattern as evident in ITC and various other stocks
from time to time. Large Cap Managements generally have the bandwidth and competency to overcome
these kind of short term problems and can emerge as Winners after few years. Such stocks test your patience
for few years and then reward you.
8 Likes
StonePitbull 665 January 22, 2024, 10:54am
gsapte:
people are shifting money to RBI Floating Rate Bonds, Post Office and Equity MF(s). We need to look
at trends of these 3 instruments as well.
Certainly Equity MF SIP has moved up in 2023, so that could be one of the reasons but we can not
jump to conclusions so easily.
Quoting from The Signal (today’s edition)
The bull run in equities is taking low-cost money away from bank savings and current accounts to other
instruments such as mutual funds and shares-linked insurance plans. As a result, they have to pay
higher interest rates to attract deposits. On the lending side, nimble-footed shadow banks such as Bajaj
Finance, Shriram Finance, and LIC Housing Finance are luring away lucrative retail borrowers from
banks. The RBI, worried about the explosive growth in unsecured loans such as credit cards, is already
clamping down.
A random investor’s rant about HDFC Bank branch expansion:
What is the benefit of opening a branch between 1-2 km rather than 5-6 km when most of the people prefer
to bank online.
No one has time to visit a branch and instead of improving their tech positioning, they’re opening more
branches.
2 Likes
keeyes 666 January 22, 2024, 11:33am
I do have the same question since the urban population is becoming tech savvy. In my locality, I get to see 7
to 8 HDFC branches within a 5 km radius and am wondering how much does it cost to run these on a daily
basis. For the past 12 years my salary account was/is with CiTi and StanChart and did not have the need to
visit them once except to collect physical statements for visa purpose
Disc holding
3 Likes
Mayank.mail 667 January 22, 2024, 12:08pm
I also used to think the same, but in recent times whenever i have had to visit the branch i realized that its
always been busy there. Retired people who prefer to get their passbooks updated sometimes bringing
passbooks of not just their family members but also neighbours then many times ppl seeking loans come
down to the branch, negotiating on the interest rates. ppl visiting branches to operate lockers, etc. quite a
few use cases to keep the staff busy.
Pls if you notice the branch size has steadily dropped keeping the rent cost low.
2 Likes
Deven 668 January 22, 2024, 1:10pm
The best things I like of HDFC Bank’s new management is their silent work. HDFC Bank CEO is similar to
ICICI banks’ CEO - no big appearance in TV or otherwise. Also in concall one person reply most queries. It
seems they know what they are doing hence silently increasing bank branches mainly in tier - 3, 4 cities.
Disc: Invested, added more in recently. Views are biased.
5 Likes
Kaustav_Gupta 669 January 22, 2024, 1:17pm
Presence of physical branches enable capturing of localised marketplaces, unorganised sector, mom and pop
stores etc. Size of branches is small and man-power is reduced. In some branches, branch manager is also
doubling as relationship manager for ‘preferred’ set of customers whereas larger branches have dedicated
relationship managers. There is still variation in level of engagement, at the very least in perception.
And, I presume if cost-benefit of opening branches reverses, they can be curtailed down to few large
branches. This has been observed in securities and brokerage business arm of banks where adoption of
technology increased sharply in past few years. (PS: Some elderly people still go to bank branches to apply
for IPOs via physical mode).
Disclosure: Small tracking position. Contemplating HDFC Bank vs Index value proposition
2 Likes
Vinayaka123 670 January 22, 2024, 8:09pm
The other main purpose of the branches is to sell products.
Whenever someone visit a branch for whatever reason it’s a great opportunity to push the customer into
buying
Insurance
Mutual fund
Home loan
Etc etc.
If we all just use Internet banking and never visit the branches, how will they be able to sell all these
products?
Whenever they sell insurance, hdfc life can benefit if they sold hdfc life insurance. Hdfc Bank has a stake in
that entity so great.
When they sell home loans it’s great because it’s merged with Hdfc now
When they sell mutual fund, hopefully they are selling hdfc mutual funds in which case it boosts hdfc amc
which is also great because the bank owns amc.
So as a owner in the bank and amc and hdfc life it is all win win win.
Let them open many branches and sell sell sell more products
1 Like
Baratam_Srinivas 671 January 23, 2024, 4:12am
Yesterday i had visited HDFC bank in Visakhapatnam as my upi transactions were blocked and they had
insisted me to visit the branch personally. After completion of my work, they had insisted me to take term
insurance. They are offering term insurances other than HDFC related also. When i told that i had already a
term insurance, then they were asking me about mutual funds. They had also offering me other mutual funds
also.
keeyes 672 January 23, 2024, 4:37am
Yes, partly true. Again, the opinions expressed w.r.t branch expansion is based on the experiences of
different individuals.
The expansion of branches into Tier 2 and 3 is meaningful because these areas are typically served by PSU
banks and the private banks would definitely want a pie of that customer base
Other than this, rapid expansion of branches without a clear strategy in urban areas is not convincing to me
for the below reasons:
1. One gets to see more HDFC banks adjacent to each other, as I mentioned in my previous post. I haven’t
seen the Kotaks or IDFCs like this
2. The majority of the current customer base of private banks are tech-savvy, salaried or business-oriented
and will not have time to visit the branches
3. Most banks are flooded with either pensioners or those who flood the banks to withdraw the money
deposited through various government schemes and Jan dhan accounts (zero value to CASA but only
puts operational stress on the banks)
4. The consumers are very informed these days when it comes to insurance, and they compare various
schemes through aggregators like policy bazaar and ditto before deciding to buy one. Even legacy
insurance players like LIC employ associates who will reach out to potential customers at their offices or
homes
5. The same goes for home loans as well, since agents catch hold of potential customers either at their
office or through tele-marketing. On average, I get to receive at least 5–6 calls daily offering pre-
approved home and personal loans
I believe the HDFC bank management knows better but they should have a clear strategy for the expansion
of branches and justify the same through acceptable revenue per branch and revenue per employee metrics
1 Like
Rushil 673 January 23, 2024, 4:58am
Another question in my mind is as follows:
Is 4% NIMs a high probability for private sector banks going ahead or will this shrink structurally due to
competition?
If yes, then the large private banks can compund well for us.
If not then there will be time correction in them.
I don’t have a framework to think about this. US banks have lower NIMs as a comparison.
Would request anyone who has thought this through to help.
1 Like
iyeron 674 January 23, 2024, 5:15am
IMO, NIMs would shrink going forward too. Banks that have physical presence will not be able to compete
with fintechs who have less physical presence since higher costs (branch, infrastructure, personnel costs etc)
mean higher priced loans to protect NIM which will not go well with people opting for loans when it is
available at cheaper interest rates from fintechs.
Amit_Agarwal1 675 January 23, 2024, 5:17am
Nice Perspective put forward by Aditya Grover here:

Did the elephant fall while dancing?
Discussing why HDFC might be in a tough situation in the near term
Hat Tip: alphaideas.in
5 Likes
nirvana_laha 676 January 23, 2024, 5:17am
And where will fintechs get their money from? They don’t raise deposits.
1 Like
iyeron 677 January 23, 2024, 5:30am
That’s right. Deposits with banks are as it is shrinking. All other source of funds being equal fintech would
be able to offer loans at cheaper/equivalent rates and garner better NIM.
Vinayaka123 678 January 23, 2024, 6:43am
Even if you assume no one puts a single additional rupee as deposit into Hdfc.
I suspect hdfc Bank can raise funds via ncd etc at a cheaper rate than the new age fintechs.
When I am looking for a loan, I don’t care much which company lend me money. (Money is fungible) but
when I am going to lend money (or deposit money which is also lending to the bank even though they don’t
say it out loud) I very much care about the stability and reputation of the bank.
As far as I know, India doesn’t have a deposit insurance like the US (what’s called FDIC). FDIC in the US
covers up to 250k of deposit per account. If a bank goes bust then anything more than 250k is potentially
lost. This would potentially mean that I shouldn’t really care which bank I keep my money as long as it’s
below 250k. But I still choose a reputed bank since I don’t want to go thru any angst of getting the money
thru the deposit insurance scheme of shit hits the fan.
Even the FDIC in the US is funded by every bank making a contribution. It assumes some banks going bust.
But if many large banks go bust, then even the FDIC wouldn’t be able to pay everyone I think. All
insurances must assume some base case and some worst case scenario.
Back to Indian banking, I think someone told me about 1lk is guaranteed beyond that it’s possible to lose it
a bank goes under. So it’s best to keep money in PSB or very reputable private banks (even there over might
distribute between multiple banks). I would never deposit any money in any of the fintechs even if they
were taking deposits.
During the 2008 financial crisis, ICICI was very close to collapse. You can read about it. Although the bank
officials will never acknowledge these things because it’s all based on confidence.
4 Likes
Ascendant 679 January 23, 2024, 6:48am
India does have upto 5L insured by banks covered by DICGC.
8 Likes
Vinayaka123:
During the 2008 financial crisis, ICICI was very close to collapse. You can read about it. Although the
bank officials will never acknowledge these things because it’s all based on confidence.
You are correct. Many investors knowing this have stayed away from ICICI Bank after 2009 including me. I
was unable to build conviction in ICICI Bank for a long time knowing their high exposure to UK/Europe if
I remember correctly. Now things have changed but I have not build conviction in ICICI Bank after 2009.
3 Likes
Aditya_Grover 681 January 24, 2024, 5:17pm
Thanks for posting it here, and introducing me to Valuepickr platform. I continue to remain bearish on large
private banks and would write more on it, as I am yet to find that competitive edge that used to exist before
covid for HDFC and Kotak. What I see happening is margin pressures not going away anytime soon. In Q3
FY24, Axis & ICICI took away good chunk of deposits but happened at a major cost of NIMs compression.
If this war for deposits goes on like this, all players would suffer. So i’m still out.
5 Likes
Vinayaka123 682 January 25, 2024, 3:15am
I have wondered why HDFC bank pays out a dividends. Especially is cash is the raw material for their
business, why give it out instead of reinvesting it into the business and earn higher returns.
Plus the dividends gets dissipated to some extent with taxes too.
I understand there may be a large shareholder base for whom the dividends serve as a income but then they
could always sell a few stock units to get the cash.
With so much noise around the tight liquidity in the banking sector and real need to shore up deposits due to
merger, doesn’t it make sense to halt the dividends or atleast cut to some extent?
Would the share tank majorly for such an action?
6 Likes
nav_1996 683 January 25, 2024, 4:03am
Agree. Deposit will come to HDFC. Right now everybody is too complacent to see any risk. Let’s wait for
some risk to rear it head.
Subhadeep 684 January 25, 2024, 4:12am
In the last few messages, many have determined HDFC Bank is at cheap valuation just because it is lower
than historical valuations. Is that a good enough reason ?
Things to Ponder
1. Why is the bank not able to raise deposits in sync with Assets ?
2. HDFC Limited deals cannot be replicated by HDFC Bank since they are under more stringent
regulations. How will it be replenished? So forget growth the base itself is smaller to start with.
3.For a giant like hdfc bank to grow 15-20-% corresponds to literally building a new small bank every
year because the nos are so big. What is the opportunity size for Hdfc Bank to be able to do it all the time
?
Disclosure- Was my largest holding for 15+ years but exited completely.
4 Likes
Ramanathan_Narasimha 685 January 25, 2024, 5:42am
IMHO, not being aggressive in deposits as well as loans may be good in the long run. We all know that
Deposit Mela and Loan Mela in the past have only resulted in pain later. The key is how they are able to
make a better return for the existing funds in housing finance vertical as this was one of the synergies
expected in the merger. Disclosure: Invested My views may be biased.
1 Like
StonePitbull 686 January 25, 2024, 5:53am

Subhadeep:
HDFC Limited deals cannot be replicated by HDFC Bank since they are under more stringent
regulations. How will it be replenished? So forget growth the base itself is smaller to start with.
Why couldn’t they anticipate this before?

Based on your comments, merger seems to have been counterproductive for HDFC’s biz. in the near term,
and will take a while to sort things out.
Mudit.Kushalvardhan 687 January 25, 2024, 6:14am
Sometimes I think that we think too much about all this. In hindi they say Baal ki khaal nikalana…Let them
give some time for synergy to play out.
9 Likes
Subhadeep 688 January 25, 2024, 6:25am
It may not be obvious unless you are from the sector.
The Management is of course aware of this. Once the base is reset we can expect growth, but not to the
extent that justifies the Premium valuation that existed in the Past. We should anticipate lower PB going
forward that historical levels and treat this stock as a steady compounder.
rahulbhardwaj19 689 January 25, 2024, 6:34am
Congratulations on your journey for holding this business for more than a decade.
How do you plan to redeploy the money if you can share some context on it please.
Aditya_Grover 690 January 25, 2024, 7:12am
Currently HDFC Bank no other option than to go aggressive on deposits. This is what they planned years
before merger as well and started opening massive number of branches. Though, ICICI and Axis are not
allowing it to grow faster by gaining market share recently. If HDFC doesn’t go aggressive, RBI will
intervene as they have already started soft messaging around CD ratios. HDFC bank has worst CD ratio
right now, thanks to merger with HDFC ltd. This is exactly I try to explain in my research blog at
adityagrover.substack.com ; PS: I don’t own any of large private banks as I think they are in mere cutting
other’s business share, as of now.
raku 691 January 25, 2024, 7:39am
HDFC Bank May Sell Assets To

Bring Down Costs — NDTV Profit
Exclusive
The bank will continue to originate high-
quality loans, but will reserve the right to sell
them through the securitisation market.
There are other ways to lower your CDR ,they can simply sell there loan books and raise cash and reduce
CDR ratio.
This might hit eps in the short term or hamper growth but it is definitely going to imporve net intrest
margins and help them reach a more comfortable CDR.
I have recently invested in hdfc bank rather than keeping money in bank fds as sooner or later intrest rates
are going to fall and we might see other smallcaps or midcaps prices valuation elevate more than they
already are.So hdfc seems like a decent bet to me in this overbought market getting a bank which is known
to have the best quality loan book amongst it’s peer and that to at a historically low valuation is what got me
intrested in the stock.
I have invested as a swing trade bet and will change it into a long term holding depending on how things
play out.
2 Likes
Batterinram 692 January 25, 2024, 9:12am
Exactly. They say buy good businesses at reasonable valuations but when they come to reasonable
valuations people are busy finding reasons why not to buy.
10 Likes
ahmed 693 January 25, 2024, 10:46am
People are acting like HDFC is going to become the next Yes Bank, if you believe that it might happen then
please share data and save retail investors like me.
As far as I understand, nothing is wrong with the company. Even after the bad merger or maybe due to
changes in RBI guidelines, the company is still giving descent or flat results.
Disc: It’s always my top holding through MFs. I recently bought it as an individual stock, doing daily SIP
for this stock. I might sell individual stock units later once this stock bounces back to do the rebalancing of
the portfolio. I did the same last year and got a 7-8% gain from this stock in a few months. I believe that it’s
a value buy when its PB < 3
2 Likes
nav_1996 694 January 25, 2024, 10:52am
Premium valuations were not just for growth. It is also for pristine asset quality and prudent lending. This
factor has not changed. People have forgotten credit risk and credit costs as economy is in upswing. Once
few sectors face stress people with start appreciating HDFC’s quality of asset franchise.
7 Likes
ahmed 699 January 25, 2024, 3:43pm
RBI approves LIC to acquire aggregate holding up to 9.99%
2 Likes
Sid_Mathew 700 January 25, 2024, 3:47pm

RBI approves LIC to acquire up to 9.99% holding in the bank.
Ascendant 701 January 25, 2024, 4:29pm
A timed move well planned by our government to support Indian markets till elections. The time horizon for
LIC’s investments is beyond 5 years.
For the next 1 year, we won’t be seeing improvements in HDFC Bank financials.
2 Likes
Daksh_Verma 702 January 25, 2024, 6:09pm
Why is it taken as a good news ? HDFC ADR is up.
jeewangarg 703 January 25, 2024, 6:29pm
Because of the above news (LIC buy)
Amit_Jain3 704 January 25, 2024, 6:43pm
What am I Missing Here???
3 Likes
Vinay_T_M 705 January 25, 2024, 9:36pm

One of the big reasons why HDFC Bank’s ADR always traded at a significant premium was because of the
foreign investors limit (74% for an Indian private bank) which was are already hit.
As the large foreign fund managers (pension funds, sovereign wealth funds, municipal corporations etc)
need to invest big money in a high quality franchise like HDFC Bank, the limit was acting as a big hurdle,
they were never getting the required volumes and availability itself was an issue, hence the ADR always
traded at 15-30% premium for HDFC Bank. The merger has obviously played a spoil sport to this and the
fact that ICICI, Axis are back to good days, constant FII/FPI selling has sent HDFC Bank’s foreign investor
limit well below 74%, so there is enough room for foreign investors to allocate fresh money in HDFC Bank.
As per the Dec 2023 shareholding pattern, foreign investors still have 21% legroom to get to the limit of
74% in HDFC Bank. 21% legroom left at a ~$100bn base is $20bn. So, paying up 15-30% premium for the
ADR makes little sense.
For that matter, from the random google searches I did on other Indian companies, ADRs generally trade at
discount for other companies
11 Likes
Vinay_T_M 707 January 26, 2024, 5:11am
I assume you are seeing the shareholding pattern on screener. If that’s the case, the numbers we are seeing is
for the merged entity (HDFC Bank + HDFC Ltd)
If you can go to bse/nse and see HDFC Bank’s shareholding pre 2022, you will see that the promoters of
HDFC Bank: HDFC Ltd and HDFC investments Ltd held ~26% of the shares, both were marked as foreign
promoters. These shares are effectively cancelled after the merger. New shareholding pattern is adjusted for
this.
The foreign shareholding is 60% as of Dec’23 (against the limit of 74%) and the float is now effectively
100% since the erstwhile foreign promoter’s shares are cancelled.
There a few technical issues like fii/fpi shareholding, msci weight, crr, slr, merger costs etc that will have a
weight in the near term. If they overcome these challenges (which should happen sooner given the
reputation of the management), people can finally focus on what’s relevant (NIMs, ROE etc). A long term
shareholder like LIC is entering HDFC Bank knowing all these challenges should be done away looking
being 5+years. Ofc, the NIMs will not be in 4.3% in the future but it’ll most certainly not be 3.4% in the
long term. Patient long-term investors can make decent returns given the multiples have come off sharply
2 Likes
Ascendant 708 January 26, 2024, 7:31am
Tell me what use is holding HDFC Bank if it is not giving out any dividends?
No dividends policy is for the company which are currently in huge growth stage and can re-invest.
HDFC Bank, TCS are matured companies, and they have no short of cash. They are in the stage where they
need to return money to the shareholder through dividends and buybacks.
All the smallcaps we are investing in is speculation and hope that one day once they have 10x their
earnings, then they will give us small dividend % like 2-3% which would be 20-30% for us since we bought
the stock when share price was 1/10.
I see absolutely no point in owning a large matured company which does not give me dividends, as
otherwise my holding is just a record in demat form.
2 Likes
Sandeep_Verma 709 January 26, 2024, 7:59am
A company that’s growing profit at 19% labeled as Matured, CEO claims they can add another HDFCB
every 4 years. I would very much call it a growth machine.
6 Likes
Sandeep_Verma 710 January 26, 2024, 8:04am
If India’s GDP has to grow at 6%, add 7% to 10% real inflation on top , and then management efforts like
increasing branches, its really difficult even for large banks to not grow at 15%, they have to be really lousy
at their job to not be able to grow at minimum 15% for next 10 years to come. Can’t say the same about IT
service based giants though with all these AI threats looming.
saurabhgupta 711 January 26, 2024, 8:35am
In Rural and Semi urabn areas, people still use to visit branch, they are not tech savvy and at the same time
they do have fear of online fraud,so they don’t prefer technology.Apart from that old age people also don’t
use technology to a great extent.
VALUE2017 712 January 26, 2024, 9:58am
HDFC bank minimum balance charges and high service charges will act as a hinderance in mobilising new
accounts in rural and semi urban areas…
Zero balance account and minimum service charges had impacted profitability of PSU Banks and because of
which PSU Banks over a period of time have done underperformance , however now all these expenses are
well adjusted in their cost structure and they are now comfortably place in terms of deposit mobilisation.
Mobilising deposit from rural areas will be challenge for HDFC Bank and may be their will be an under
performacne due to additional expenses for a couple of years.
1 Like
umeshjoshi1980 713 January 26, 2024, 2:43pm
RBI allows LIC to acquire up to 9.99% stake in HDFC Bank

"LIC has been advised by RBI to acquire the aforesaid major shareholding in
the bank within one year i.e. by January 24, 2025," the bank said
valueinvesting101 714 January 26, 2024, 5:54pm
I had always wondered about this contradictory behavior of returning cash to shareholders via dividend and
then raising additional capital by diluting shareholders. Dividend payout ratios for ICICI, HDFC have
always been much higher than Kotak which had promoter shareholder who was more aligned with
shareholders. Dividend yield for large private banks has been around 1-1.5% where as for Kotak it was
around 0.07% so big difference of 100-150 bps vs 7 bps.
I think this behavior is explained by looking at the management incentives. Banks are typically valued at
BVPS. When large private sectors banks prefer to raise funds when are trading at P/B of 3-5 unless they are
forced to raise funds at lower valuation. Suppose bank BVPS is 100, P/B of 4 (share price of 400) and bank
has 100 shares outstanding and. When they issue dividend of 1 then updated BVPS is 99.
Now bank issues 1 share at 4 P/B so updated share count 101. Earlier total book value was 100100 = 10,000
now new book value is 100100 + 1*400 = 10400 so BVPS is 102.97 and now Raising money at P/B > 1
raises book value. Increased book value with same multiple leads to higher share price. 102.97 * 4 = 411.88
(price bump from 400)
If you look at history of growth in the book value of HDFC Bank then you can see book value increasing
3-4% every quarter from net income and also increasing in larger step whenever they did share issuance
(typically every 3-4 years whenever price was suitable)
This benefit starts to dilute when P/B decreases towards 1 and reverses completely below P/B of 1.
14 Likes
Lets look at the big picture. One of the narratives going around now is that since HDFC Bank is already
very big in terms of market cap its growth is going to be limited. Lets take a look at TD Bank in Canada, at
a market $110-120 Bn it is roughly 6% of Canada’s GDP. If Indian GDP grows at 6% for 20 years in $
terms our GDP will be close to $13 trillion and if we apply a similar ratio to HDFC Bank we get a market
cap of $780B considering the current market cap of about $130B this translates to a CAGR of 9.3% in $
terms and considering historical rupee depreciation of 5% we get to 14%+ and this will go to15%+ if we
consider dividends. In absolute terms this is a very good return but relatively this is even better because of
the recent run up in the broader markets other opportunities are fairly limited. I am assuming the growth of
HDFC Bank will be similar to credit growth in the economy (with market share gains returns can be
potentially higher). This narrative is true for other big banks as well so a basket of big banks makes sense.
20 years is a long time a lot of things can change for the better or for worse but the scenario I have painted
is not far fetched and we can make decent returns in Big Banks relative to other opportunities in the market.
7 Likes
vaibhavkansal 716 January 28, 2024, 8:02am
I see a flaw in your calculation. In my view giving out dividend and raising money at the same time for a
company with above average ROCE (signified by P/BV>1) is irrational. It is only done as a positive
signaling mechanism to retail investors.
Taking your numbers, Price= 400, BVPS= 100, Total Outstanding Shares(OS)= 100. Lets say company
makes a total profit of 100 at the end of the year, and the management just needs 100 for future investments.
Management has two options:
Option 1: Use 100 from profits to invest in future investments.

Total BV=10100; to keep P/BV at 4, price will increase to 404.
Option 2: Give out 100 as dividends and dilute 0.5% to raise 200.
Total BV=100*100-100+(0.5)400100=10100; and Total OS=100.5.
To keep P/PV at 4, price will increase to 402.
As compared to Option 1, the existing shareholders loose even after including the dividend (of 1) in the final
share price of 402.
1 Like
Mayank.mail 717 January 28, 2024, 8:23am
Nice parallel, but Indian banking i suspect is more fragmented with HDFC bank though largest pvt sector
bank still current %age is only 4.4% of India’s GDP. Also Indian banking is very dynamic due to major
presence of Fintechs plus increased prudence coming to PSU lending since last few years.
But i agree given the other opportunities in the market, HDFC bank at current valuations and any falls, may
provide a decent 14-15% returns over 5 years…
1 Like

Credit growth has typically exceeded the GDP growth. If that continues and HDFC keeps its mkt share and
mkt cap growth keeps pace with earnings growth which in turn keeps up with credit growth then 4.4% of
GDP should increase going forward. I know a lot assumptions have been made but don’t think any of the
assumptions are unreasonable
1 Like
Ramanathan_Narasimha 719 January 29, 2024, 8:40am
IMHO , when HDFC Ltd was the parent, there was a compulsion to declare dividend to improve thei
parents income . Now that it is not the parent, they do not have any compulsion to declare dividends. Let us
see how efficient they are in capital allocation. Disclosure Invested and hence my opinion is biased.
2 Likes

HDFC Bank - We Understand Your World - Stock Analysis & Valuation

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• PAT: 191Cr ← 240Cr

• #branches: 215 / #Cities: 147

---------- HDB Financial Services (HDBFSL) - NBFC [95% holding]

• Rev: 2.2KCr ← 1.9KCr YUP 15%

Ayshi 503 October 16, 2022, 8:11am

Highlights of the Earnings Call that took place yesterday:

Shrinivasan Vaidyanathan – CFO

• Global market conditions are improving

• Think about what the margin means -

Suresh Ganpathy – Macquarie

Kunal Shah – ICICI Securities

• On spend, we see good amount of traction coming in.

Rahul Jain – Goldman Sachs

• The HDB asset quality trajectory is improving and will continue

Q: Restructured book in HDB?

• There is some management overlay that we do have and continues to be there.

• These are variable cases

• Slippages in Q2FY23 were 36 bps or 5700 crore

• That is right. Merchant relationship is with the bank.

Manish Shukla – Axis Capital

• What I said in May stands true even today.

• There is no particular timeframe for this

• That is part of the equation and we would consider opportunities to do that.

s.j.saha 505 November 11, 2022, 9:05am

Investor_No_1 506 November 11, 2022, 12:36pm

Merged HDFC entity could have double the weight in MSCI,

sudtintin 507 December 19, 2022, 10:20am

Chief Executive Officer and Managing Director of HDFC Bank

Ayshi 508 December 19, 2022, 11:32am

s.j.saha 510 January 4, 2023, 1:16pm

Dec’22 end Update

s.j.saha 511 January 14, 2023, 11:12am

Dec’22 Quarterly Results

ranvir 512 January 14, 2023, 12:29pm

Disc : invested, biased.

nav_1996 513 January 14, 2023, 12:38pm

Vikky9995 514 January 14, 2023, 3:27pm

nirvana_laha 515 January 14, 2023, 4:25pm

Ayshi 516 January 15, 2023, 11:18am

• Aggressive branch expansion at 7183 branches vs 5779 branches in Dec 21

• On is that normally…3rd quarter is seasonal

SURESH GANPATHY – MACQUARIE

• Good point Suresh

• Not yet, Suresh.

• There are 2 aspects.

Q: What would be the quantum of interest on tax?

• 6 bps would be around 300 crore

SAURABH KUMAR – JP MORGAN

HARDIK SHAH – GOLDMAN SACHS

• We do buy in the market – different products

Q: Do we have any shortfall there?

• Excess gets determined at the end of the year

• Retail card spend growth is at 27% - that is good

NITIN AGGRAWAL – MOTILAL OSWAL

• We evaluate QoQ on what to do

KUNAL THANVI – BANYAN TREE CAPITAL ADVISORS PVT LTD

MB MAHESH – KOTAK SECURITIES

Q: What is the definition of a retail current account?

• Retail current account is customer managed out of the branches

PRANAV K. – BURNFIN (?) PRIVATE WEALTH MANAGEMENT

Surender 517 January 16, 2023, 5:14am

theashworld 518 January 17, 2023, 2:49pm

Raising retail deposits will be a challenge due to increasing competition.