hdfc bank investor presentation september 2011 meet/100180_20111019.pdf · wide range of products...

Investor Presentation

Tracking the India Growth Story

Meeting Diverse Customers’ Needs

Unique Franchise in the Indian Banking Sector

Key Business Initiatives

Contents


Financial Highlights

Value Proposition

1


Private Consumption

• Strong distribution network and retail customer franchise

• Equally well positioned in urban and rural markets

• Leading player across retail loan categories

Government

• Large tax collector for the Government of India

• Significant provider of cash management services for public

sector and semi government undertakings

India GDP* `. Tn

20

30

40

50

60

sector and semi government undertakings

Investment

• Leading working capital banker to manufacturers and

contractors in the infrastructure segment

• Project financing only to strong and established players

• Debt syndication team in place

• Significant market-share in commercial vehicle and

construction equipment financingInvestment

2

*Source CSO – GDP at Market Prices at FY 2004-2005 prices

FY – Fiscal year ended March 31

` - Rupees

Government

Private consumption

0

10

FY 2009 FY 2010 FY 2011





Contents



Value Proposition

3

Wide Range of Products and Customer Segments

Loan Products:

Auto LoansRetail Business BankingPersonal LoansCredit Cards2-Wheeler LoansCommercial Vehicles FinanceConstruction Equipment FinanceHome Loans / MortgagesLoans against SecuritiesTractor and Agri loansEducation LoansLoans secured by Gold

Other Products / Services:

Depository AccountsMutual Fund SalesPrivate BankingInsurance Sales (Life, General)NRI ServicesBill Payment ServicesPOS TerminalsDebit CardsGold SalesForeign Exchange ServicesBroking (HDFC Securities Ltd)

Deposit Products:

Savings AccountsCurrent AccountsFixed / Recurring DepositsCorporate Salary Accounts

Commercial Banking:

Working Capital

Transactional Banking:

Cash Management

Key Segments:

Large CorporateWholesale

RetailBanking

Working CapitalTerm LoansBill CollectionForex & DerivativesWholesale DepositsLetters of CreditGuarantees

Cash ManagementCustodial ServicesClearing Bank ServicesCorrespondent BankingTax CollectionsBanker to Public Issues

Large CorporateEmerging CorporatesFinancial InstitutionsGovernment / PSUsSupply ChainMicrofinance Institutions / SHGsAgricultureCommodities

Products / Segments

Foreign ExchangeDebt SecuritiesDerivativesEquities

Other Functions:

Asset Liability ManagementStatutory Reserve Management

Complete Suite of Products to Meet Diverse Customers’ Needs

Treasury

WholesaleBanking

4

0

1,050

2,100

2009 2010 2011

Total Deposits Gross Advances Profit Before Tax

Business Mix

`. Bn`. Bn `. Bn

0

35

70

2009 2010 2011

0

850

1,700

2009 2010 2011

Wholesale Retail

5

Indian GAAP figures. Fiscal Year ended 31st March; ` - Rupees

Gross advances and Profit Before Taxes classified as per RBI guidelines.

“Other Banking Operations Segment” (which includes Credit Cards, Third Party Product sales etc.) has been added to the Retail Segment

• Customer segments - main drivers of net revenues

• Well balanced loan mix between wholesale and retail segments

• Higher retail revenues partly offset by higher operating and credit costs

• Equally well positioned to grow both segments

Wholesale RetailWholesale Retail





Contents



Value Proposition

6

Strong National Network

� All branches linked online, real time

� “Anytime, Anywhere, Anyhow” banking

Mar ‘09 Mar ‘10 Mar ‘11

Cities 528 779 996

Branches 1,412 1,725 1,986

ATMs 3,295 4,232 5,471

7

� 70% branches outside the top 9 cities

� Customer base of 21.9 million

0

1,050

2,100

2009 2010 2011

Total Deposits Core CASA Ratio Average Saving Balances per Account

`. Bn

0%

26%

52%

2009 2010 20110

25,000

50,000

2009 2010 2011

`.

High Quality Deposit Franchise

2009 2010 2011

Time Savings Current

• Healthy proportion of CASA (current & savings) deposits

• Floats from multiple transactional banking franchises

• Healthy growth in new customer acquisitions

• Provides customer base for ongoing cross-sell through branches

• Quality growth rather than mere numbers

Indian GAAP figures. Fiscal year ended 31st March

Core CASA ratio based on daily average balances for the year, adjusted for floats on account of IPOs and other one-offs

` - Rupees

8

2009 2010 2011

5.87%

4.66%4.30%

3%

6% 4.22% 4.35% 4.25%

3%

5%

Cost of Deposits Net Interest Margin

Low Funding Costs – Healthy Margins

0%

2009 2010 2011

0%

2009 2010 2011

• Amongst the lowest deposit costs in the industry

• Healthy margins – relatively stable over rising & declining interest rates

• Average yields supported by higher proportion & product mix of retail loans


9

Strong Non-Funded Revenues

Multiple sources of core fees &commissions:

Core Banking charges (Retail & Wholesale) Third party product salesRetail Asset FeesCredit card FeesCash managementTrade FinanceDepositary chargesCustody

10,000

21,000

32,000

43,000

`. Mn

Fees & Commissions

FX & Derivatives

P/L on Investments *

Indian GAAP figures. Fiscal year ended 31st March; FY - Fiscal Year ended 31st March.

* Profit / (loss) on sale and revaluation (mark to market) of the Government Bond portfolio etc.& includes miscellaneous income

` - Rupees

10

• Other Income (non-funded revenues) at 29% of Net Revenues in FY 2011

• Composition of Other Income in FY 2011:

• Fees and commissions 83%,

• FX and Derivatives Revenues 18%,

• Loss on sale of Investments (1%)

Custody

-1,0002009 2010 2011

ATMs40%

Branches43%

Phone Banking

14%

Internet 2%

Mobile1%

2001

Multiple Delivery ChannelsMultiple Delivery ChannelsGreater Choice and Convenience for Our Retail

CustomersGreater Choice and Convenience for Our Retail

Customers

2011

ATMs30%

Branches18%

Phone Banking 11%

Internet39%

Mobile2%

Leveraging Technology

The charts above cover only transactions initiated by our own customers and which could have been transacted at the Bank’s branches.

Transactions such as (a) SMS alerts sent to customers, (b) point of sale (POS) transactions, and (c) transactions by holders of other

banks’ cardholders have therefore been excluded.

% Customer Initiated Transactions by Channel% Customer Initiated Transactions by Channel

Regionalized Processing UnitsRegionalized Processing Units Derive Economies of ScaleDerive Economies of Scale

Electronic Straight Through ProcessingElectronic Straight Through Processing Reduce Transaction Costs and Error RatesReduce Transaction Costs and Error Rates

Data Warehousing, CRM, AnalyticsData Warehousing, CRM, Analytics Improve Sales & Credit Efficiencies, Cross-sellImprove Sales & Credit Efficiencies, Cross-sell

Innovative Technology ApplicationInnovative Technology Application Provide New or Superior ProductsProvide New or Superior Products

30%

11

0

12

24

2009 2010 2011

General Provisions Specific Provisions Gross NPAs

NPA% to Advances Loan Loss Provisions

`. Bn

Healthy Asset Quality

2.0%

1.4%1.1%

0.6%0.3% 0.2%

0%

1%

2%

2009 2010 2011Gross NPA % Net NPA %

• Amongst the best portfolio quality (wholesale & retail) in the industry

• Strong credit culture, policies, processes

• Specific provision cover (excluding write-offs, technical or otherwise) at 83% of NPAs*,

total provision coverage of over 100%

• Restructured loans formed 0.4% of the Bank's gross advances as on March 31, 2011,

of which the loans categorized as NPA were 0.1%

Indian GAAP figures. Fiscal year ended 31st March. FY 2009 figures include impact of merger of Centurion Bank of Punjab;

* Net Non Performing Assets (NPA) = Gross NPA less specific loan loss provisions

` - Rupees

12

0

20,000

40,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Net Profit `. Mn

Consistent Financial Performance

52.9

67.6

85.0

0

45

90

2009 2010 2011

ROA EPS

1.30%1.53% 1.58%

0%

1%

2%

2009 2010 2011


* 10 year Compounded Annual Growth Rate

` - Rupees

113

`.





Contents



Value Proposition

14

`. Bn Wholesale Advances

Accessing Multiple Segments

• Leveraging relationships with large & emerging

corporates for multiple revenue streams

• Focus on house banking

• Balanced mix between working capital financing,

medium / long term loans and transactional

banking

• Well diversified loan portfolio across industry

segments

500

1000

Others

FIG

Business Banking

CE / CV

Emerging Corporate

Corporate

• Leading provider of electronic banking services for supply chain management (SCM)

• Structured cash management-cum-vendor/distributor finance

CorporateDealers

Distributors

OEM Customers

Vendors

Indian GAAP figures. Fiscal year ended 31st March; Total wholesale advances are as per the RBI’s guidelines on classifications

‘Others’ includes Capital markets and commodity finance, and other consumer loans over `. 50 million.

FIG – Financial Institutions and Government group; ` - Rupees

115

0

2009 2010 2011

12,500

25,000

Primary Settlements Accounts(Stock Exchanges)

Nos.`. Bn

Gross Cash Management Volumes *

Focus on Transactional Banking Opportunities

800

1600

0

2009 2010 2011

• Clear market leader : cash settlements on stock & commodities exchanges

• Leading provider of cash management solutions

• Large corporates and SME

• Financial Institutions

• Government (including tax collections)

For the Fiscal year ended 31st March,

* Gross Cash Management Volumes adjusted for collections on account of IPOs

` - Rupees

116

0

2009 2010 2011

0

4,000

8,000

2009 2010 2011

FX & Derivatives Revenues

`. Mn

Customer Revenues Mix

Customer Focused Treasury Products

Corp

18%

ECG

11%

Retail

52%

BB

5%

FIG

5%Others

9%

2009 2010 2011

• Revenues – Largely customer driven, low reliance on trading revenue

• Treasury advisory services

• Plain vanilla FX offerings to retail and business banking segments

• FX and derivatives product sales to corporate and institutional customers

Indian GAAP figures. Fiscal year ended 31st March; ` - Rupees

Corp – Corporate, ECG – Emerging Corporate Group, BB – Business Banking, FIG – Financial Institutions & Government Group;

‘Others’ includes Capital Markets and Commodity Finance

117

500

1000

Two Wheelers

Credit Cards

Others

Commercial Vehicles

Personal Loans

Home Loans

Business Banking

Auto Loans

• Well diversified product mix

• Balancing volumes and market

share with margins and risk

• Mortgage offering – origination

(loan disbursements) now

around ` 7 bn per month

`. Bn

Retail Loans – Profitable Growth

0

2009 2010 2011

around ` 7 bn per month

• Loan losses within product

pricing parameters

Indian GAAP figures. Fiscal year ended 31st March; ` - Rupees

Retail loans are net of loans sold and include loan assignments. Retail loans have been reclassified in line with RBI guidelines.

‘Others’ includes Gold loans, Tractor Loans, Loans to Self Help Group, retail overdrafts;, etc.

118

0

6

12

18

2009 2010 20110

25

50

2009 2010 2011

0

165

330

2009 2010 2011

Number of Cards Credit Cards Receivables Acquiring Th ruputs

`.Bn `.BnMn

Cards – Achieving Scale

Credit cards Debit cards

• A market leader in credit card issuances and merchant acquisition

• Over 70% of new credit cards issued to internal customers

• Loss rates improved in FY2011, well within the range priced in and lower than

industry levels

• Merchant acquiring – over 120,000 POS terminals, 36% growth in thru-puts

Indian GAAP figures. Fiscal year ended 31st March. ` - Rupees

FY 2011 – Fiscal year ended 31st March 2011POS – Point of Sale

119

12

24

550

1,100

Mutual Fund Sales Life Insurance Premium

Distribution of Third Party Products

`.Bn`.Bn

0

2009 2010 2011

0

2009 2010 2011

• Steady performance in a challenging, volatile environment

• Fee growth moderated by change in product mix and new regulations

• Relationship managers for private banking and high net worth segments

• Branch sales process to drive distribution of third party products


` - Rupees

20

Banking on Rural India

Local Government

Self Help Groups

Food Processors

Affluent Individuals Deposits, Cash

Management, etc.

No frills accounts

Micro loans

Business banking

products

Deposits

Wealth management

Loans

21

FarmersIntermediaries

(Arhatiyas, traders)

Participating in every stage of the Rural EconomyDispensing credit whilst maintaining credit standards

Pre & Post harvest

credit, tractor

loans, Kisan cards

Served through Mandi

branches

Current A/cs

Business loans

Cash Management

HDFC Securities Limited

• Amongst the top retail equity brokerages in the country

• Over 150 branches and 1.1 million customers

• Revenues from brokerage as well as distribution of financial products

• FY 2011 Net Profit : ` 770 million

Subsidiary Companies

HDB Financial Services

• NBFC catering to customer segments not served by the Bank

• Inherently lower cost structure

• Network size of 100 branches

• Loan book at ` 12,630 million (March 2011)

22

` - Rupees

FY 2011 – Fiscal year ended March 31, 2011





Contents



Value Proposition

23

Key Financials

`. Mn

Quarter

Ended

Sept ‘11

Quarter

Ended

Sept ‘10

Change

Half Year

Ended

Sept ‘11

Half Year

Ended

Sept ‘10

Change

Year

Ended

Mar ‘11

Net Interest Income 29,445 25,263 16.6% 57,925 49,270 17.6% 105,431

Fees & Commissions 9,879 8,570 15.3% 19,106 16,533 15.6% 35,967

FX & Derivatives 2,180 1,523 43.1% 4,480 3,241 38.2% 7,863

Profit / (loss) on Investments* 59 (486) - (269) (258) 4.2% (479)

Indian GAAP figures (` Mn) , ` - Rupees;

*On sale and revaluation (mark to market) of investments & includes miscellaneous income

24

Profit / (loss) on Investments* 59 (486) - (269) (258) 4.2% (479)

Net Revenues 41,562 34,870 19.2% 81,242 68,785 18.1% 148,783

Operating Costs 20,304 16,799 20.9% 39,650 33,227 19.3% 71,529

Provisions & Contingencies 3,660 4,545 (19.5)% 8,097 10,095 (19.8)% 19,067

Tax 5,604 4,405 27.2% 10,651 8,225 29.5% 18,923

Profit After Tax 11,993 9,121 31.5% 22,843 17,239 32.5% 39,264

• Net profit up by 31.5% to ` 11.99 Bn

• Gross advances increased by 25.6% to ` 1,899 Bn*

• Deposits up 18.1% to ` 2,307 Bn

• CASA ratio at 47.3%

• Net Interest Margin at 4.1%

Financial Highlights - Quarter ended September 2011

• Cost-to-income ratio at 48.9%

• Gross NPA / gross advances at 1.0%

• Net NPA / net advances at 0.2%

• Capital adequacy ratio (CAR) - total 16.5% of which tier I at 11.4%

25

Indian GAAP figures (Bn=Billion); ` - Rupees

* Adjusted for short-term one off wholesale loans outstanding as on September 30, 2010

Net NPA = Gross NPA less specific loan loss provisions; Comparisons with respect to corresponding figures for the quarter ended September 30, 2010





Contents


Value Proposition

26

Value Proposition – Healthy Growth, Low Risk

Consistent revenue growth in chosen segments

Strong Risk management, focus on asset quality

Branch Sales Process, Data Mining & CRM, geared for Cross sell

Leveraging organic and inorganic growth

opportunities

Disciplined capital management with a focus

on ROE

Nationwide, well entrenched, expanding

distribution network

Growth of the Bank –Tracking the India Growth

Story

Leading (Top 3) player across multiple products

Wide Product range and ongoing investments to

support growth

27

Proven ability to generate Shareholder Value

opportunitieson ROE

We may have included statements in this release which may contain words or phrases, such as “will”, “aim”, “believe”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “future”, “objective”, “project”, “should”, and similar expressions or variations of these expressions, that are “forward-looking statements”. Actual results may differ materially from those suggested by the forward-looking statements due to certain risks or uncertainties associated with our expectations with respect to, but not limited to, our ability to implement our strategy successfully, the market acceptance of and demand for various banking services, future levels of our non-performing loans, our growth and expansion, the adequacy of our allowance for credit and investment losses, technological changes, volatility in investment income, our ability to market new products, cash flow projections, the outcome of any legal, tax or regulatory proceedings in India and in other jurisdictions we are or become a party to, the future impact of new accounting standards, our ability to pay dividends,the impact of changes in banking regulations and other regulatory changes in India and other jurisdictions on us, our abilityto roll over our short-term funding sources and our exposure to market and operational risks. By their nature, certain of the market risk disclosures are only estimates and could be materially different from what may actually occur in the future. As aresult, actual future gains, losses or impact on net income could materially differ from those that have been estimated. Our forward looking statements speak only as of the date on which they are made and we do not undertake any obligation to forward looking statements speak only as of the date on which they are made and we do not undertake any obligation to update or revise any forward looking statements to reflect events or circumstances after the date in the statement, even if our expectations or any related events or circumstances change.In addition, other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this release include, but are not limited to: general economic and political conditions, instability or uncertainty in India and other countries which have an impact on our business activities or investments, caused by any factor including terrorist attacks in India, the United States or elsewhere, anti-terrorist or other attacks by the United States, a United States-led coalition or any other country, tensions between India and Pakistan related to the Kashmir region, military armament or social unrest in any part of India, the monetary and interest rate policies of the government of India, natural calamities, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in Indian and foreign laws andregulations, including tax, accounting and banking regulations, changes in competition and the pricing environment in India, and regional or general changes in asset valuations.

hdfc bank investor presentation september 2011 meet/100180_20111019.pdf · wide range of products...

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