hdfc bank financial analysis & industry comparison 2017
TRANSCRIPT
09 February 2017
H A R S H B O H R A
Financial Analysis and Industry Comparison
Table of Contents
I. Characteristics of Industry1. Industry Structure2. Classification of Banks3. Growth in Deposits
(Impact of Demonetization)
4. Low Growth of Bank Credit
5. Bank Credit vs. Systemic Credit Growth
6. Occupation Wise: Expected Growth in Credit
7. Growth Rate of Public Sector Bank
8. Industry ATM Penetration
II. Positioning of HDFC Bank (Industry vs HDFC Bank)1. CASA Ratio2. Return on Assets3. Gross NPAs4. Net NPAs5. ATMs6. Branches7. HDFC Bank - Overview8. Branch Classification9. Deposits & Advances10.Interest Incomes &
Expended
III. Business Model1. Business Model2. Delivery Channel3. Merger & Acquisition4. Business Strategies5. The People’s Bank
IV. Revenue Stream & Expansion Plans1. Customer Segments
1. Retail Banking2. Wholesale Banking3. Treasury
2. Expansion Plans
Industry StructureMINISTRY OF FINANCE
National Housing Bank (NHB) Insurance Regulatory Development Authority (IRDA )
Pension Funds Regulatory Development Authority (PFRDA) Company Law Board
Housing Finance Companies (HFCs) Insurance Pension Funds Corporates
Small Industries Development Bank of India (SIDBI)
Securities and Exchange Board of India (SEBI)
National Bank for Agriculture and Rural Development (NABARD)
Reserve Bank of India (RBI)
Financial Institutions Non – Banking Financial Companies (NBFCs)
Banks
Commercial Banks Co-Operative Banks
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Classification of Banks
20Private Sector Banks
26Public Sector Banks
43Foreign Banks
56Regional Rural Banks
1589Urban Cooperative
Banks
93,550Rural Cooperative
Banks Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Growth in Deposits: Impact of Demonetization
23%22%
17% 18%
15% 15% 15% 11%
7%
13%
11%
2008
2009
2010
2011 201
22013
2014
2015
2016
2017P2018P
Growth in Deposits Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Low Growth of Bank Credit Overall Credit to decline to 6-7% as compared to 9% in 2015-16
Growth of Bank Credit fall to multi-decade low of 5.1% as of Dec 23– TOI
Bank lending to Business, Farmers, Individual sector as on 23 Dec 16 was Rs 73.48 Lakh Crores, increase in over 5.1% over the same period of 2015-16 - RBI
Main Reasons for Decline includes Demonetization Move A Sluggish Investment Cycle Weak Working Capital Demand Increased Risk Aversion Fall in Commodity Prices Lower Funds Requirement by IMC (due to significant fall in
under-recoveries)
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Bank Credit vs. Systemic Credit Growth
15.9%
18.3%
14.6%14.4%
9.7%
13.2%
9%
10.5%
6.4%
8.1%
9.2%11.1%
2013 2014 2015 2016 2017P 2018P
BANK CREDIT GROWTH RATESYSTEMIC CREDIT GROWTH RATE
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Expected Growth in Occupation-wise deployment of Credit Agriculture Industry Services Retail
March 2013
March 2014
March 2015
March 2016
March 2017
March 2018
8%
13%
15%
15%
10%
13%
15%
13%
6%
-1%
2.7%
5%
13%
16%
7%
9.1%
7.8%
7.5%
15%
12%
16%
19%
17% 19
%
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Credit Growth for Private & Public Sector Bank
2009-102010-
112011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
10.3%
22.2%
15.3%
28.4%
14.4%
7.7%
3.6%2.6%
5.6%0.8%
24.8%20.5%
32.1%
18.2%18.2%
22.7%
16.7% 18.2%
Private Sector BankPublic Sector Bank
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Public Sector Bank – Growth Rate
Rs in BillionWorking Capital LoansTerm Loans
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
15,22119,746
19,21623,759
22,99027,746
27,17831,620
31,03636,316
33,60640,276
CAGR15.2%
Rs 73,882 Billion in 2014-15
Rs 34,996 Billion in 2009-10
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
ATM Penetration
2012 2017
105
300
2,05,151Total No. of ATMs in IndiaPoint of Sale*Source: RBI, Oct 2016
ATM per Million
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
CASA Ratio HDFC Bank SBI Bank ICICI Bank AXIS Bank CANARA Bank
2010-11 2011-12 2012-13 2013-14 2014-15
49.42%
28.33%
45.06%
41.1%
52.69%
44.03%41.34%
45.56%
44.78%
23.96%
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Return on Asset - Industry HDFC Bank Private Sector Bank Schedule Commercial
Bank Public Sector Bank
2010-11 2011-12 2012-13 2013-14 2014-15
1.581.77
1.9 2 2.02
1.4 1.5 1.6 1.6 1.6
1 1 10.7 0.7
0.9 0.90.8
0.50.4
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Gross NPAs
2010-11 2011-12 2012-13 2013-14 2014-15
Industry: Private Sector Banks HDFC Bank ICICI Bank AXIS Bank Canara Bank
5.8%
4.83%
3.22% 3.03%
3.78%
2.7% 2.5%
2.1%2%
1.8%1.47% 1.75%2.57% 2.49%
3.89%
1.28% 1.18% 1.19%1.29%
1.36%
1.06% 0.95% 0.85% 0.91% 0.89%
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Net NPAs
2010-11 2011-12 2012-13 2013-14 2014-15
Industry: Private Sector Banks HDFC Bank SBI & Associates ICICI Bank AXIS Bank CANARA Bank
0.6%
1.7% 1.8%2%
2.7%
2.2%
1.1% 1.46%
2.18%
1.98%
2.65%
1.11% 0.73% 0.77%0.97%
1.61%
0.5% 0.5%
0.7%
0.9%
0.29% 0.27% 0.36%0.44% 0.89%
0.19% 0.18% 0.2% 0.27% 0.25%
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
ATMs
12054
13561
50039
1435310463
HDFC BANK SBIBANK OF BARODA
ICICI BANK AXIS BANK
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Branches
1408 786
11,472
14092915
HDFC BANK SBI & Asso.BANK OF BARODA
ICICI BANK AXIS BANK
Source: RBI (Updt. 2009)
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Branch Classification: HDFC Bank
37 MillionCustomer Base
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
HDFC Bank Customers 30 Million Customers Worldwide 90421 Employees Largest Bank in India by Market Capitalization (Rs 3,51,951 Cr) – See
Notes for Calculation Second Largest Private Sector Lender by Assets
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Deposits & Advances: HDFC Bank
2010-11 2011-12 2012-13 2013-14 2014-15
Rs in MillionDepositsAdvances
2,085,8641,599,827
2,467,0641,954,200
2,962,4702,397,206
3,673,3753,030,003
4,507,9563,654,950
76.7% 79.21%80.9%
82.4%
81.1%
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Interest Incomes and Expended: HDFC Bank
2010-11 2011-12 2012-13 2013-14 2014-15
Rs in MillionInterest Income
Interest Expended
199,28293,851
278,742149,896
350,649192,538
411,355226,529
484,699260,742
47.1%
53.8%54.9%
55.1%
53.8%
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Business Model
Business Model Focus on Customer Relationships
Delivering High Quality Customer Service: Focusing
on Quality and not on Quantity
Leverage Technology platform
Control Operating Costs
Develop products that reduces Banks Cost of Funds
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Delivery Channel: HDFC Bank
27%
7%
13%
53%
2006
BranchesPhone BankingInternet & MobileATM
11%3%
71%
15%
2017
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Merger & Acquisition
Merger
On Feb 26, 2008
Shareholders of CBoP received 1 Share for 29 Shares
of CBoP valued at Rs 95 Billion
394 Branches
452 ATMs
Located in 180 Cities
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Business StrategiesCustomer Retention Strategy in 2008
Additional Charges waived off Services like Lockers and Demat are offered at 50% Discount Charges on Debit Card have been taken off
ATM strength StrategyBefore
- Strategic location for ATM Center- 58% Active Users use ATM once a monthAfter- 10000+ ATMs in 2012- 83% Active Users use ATM once a month
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Business StrategiesMobile Banking in Hindi in 2011 Hindi Banking Services Hindi Application for Android Users Attracted lot of Native - Hindi Speaking People
Net Safe Card in 2012 Virtual Card Complete Security Used only once Card Number, CVV and Expiry are virtual and not related to physical or original card Reduced online frauds
Special Rewards and Incentives: HDFC Bank Diners Club Black HDFC Bank Diners Club Premium HDFC Bank Diners Club Rewards
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Business Strategies Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Revenue Stream: Customer SegmentsCUSTOMER SEGMENTS
Retail Banking Wholesale Banking Treasury
Loan Products Auto Loans Personal Loans Home Loans / Mortgages Commercial Vehicles Finance Retail Business Banking Credit Cards Loans against Gold 2-Wheeler /Consumer Durable
Loans Construction Equipment Finance Loans against Securities Agri and Tractor loans Education Loans Self Help Group Loans Joint Liability Group Loans Kisan Gold Card
Deposits Products Savings Accounts Current Accounts Fixed / Recurring
Deposits Corporate Salary
Accounts
Other Products/Services Depository Accounts Mutual Fund Sales Private Banking Insurance Sales (Life,
General) NRI Services Bill Payment Services POS Terminals Debit Cards Foreign Exchange Services Broking (HDFC Securities
Ltd)
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Revenue Stream: Customer SegmentsCUSTOMER SEGMENTS
Wholesale Banking Retail Banking Treasury
Commercial Banking Working Capital Term Loans Bill / Invoice
discounting Forex & Derivatives Wholesale Deposits Letters of Credit Guarantees
Transactional Banking Cash Management Custodial Services Clearing Bank Services Correspondent Banking Tax Collections Banker to Public Issues
Investment Banking Debt Capital
Markets Equity Capital
Markets Project Finance M&A and Advisory
Key Segments Large Corporate Emerging Corporates Financial Institutions Government / PSUs Business Banking /
SME Supply Chain
(Suppliers and Dealers)
Agriculture Commodities
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Revenue Stream: Customer SegmentsCUSTOMER SEGMENTS
Treasury Retail Banking Wholesale Banking
Products/Segments Foreign Exchange Debt Securities Derivatives Equities
Other Functions Asset Liability
Management Statutory Reserve
Management
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Revenue Stream: Customer SegmentsCUSTOMER SEGMENTS
Treasury Retail Banking Wholesale Banking
Net Profit (2015-16); Rs 12,296 Crores (Increase by 20.4%)
Total Deposits - Rs 546,424 crore. An increase of 21.2%
Total Advances - Rs 464,594 crore. An increase of 27.1%
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
Expansion Plans
The Bank’s expansion plans take into account the need to
have a presence in all major industrial and commercial
centres, where its corporate customers are located, as well
as the need to build a strong retail customer base for both
deposits and loan products.
Plans to Open 500 Net Branches this Financial Year 2016 –
Economic Times
To Raise Rs 50,000 Crore through Bonds over on year to
fund business growth
Industry Overview
Industry Growth Rate
CASA Ratio
Return on Assets
Non Performing AssetsBranch & ATM Penetration
HDFC Bank Analysis
Business Model
Business Strategies
The People’s Bank
Revenue Stream
Expansion Plans
References
I. Primary Source CRISIL Industry Reports & Player Profiles
II. Secondary Sources (For Additional Info) HDFC Bank Investor’s Presentation HDFC Bank Official Website www.hdfcbank.com RBI www.rbi.org.in IBEF (India Brand Equity Foundation) www.ibef.org Times of India Economic Times
III. Definition & Meaning of Terms Source Wikipedia.com Investopedia.com Quora.com
IV. Images and Logo Source Google Images
