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HDFC Bank Financial Analysis & Industry Comparison 2017

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Content of this presentation includes Indian Banking Industry Structure, Bank classification in India, Growth of Public & Private Sector Banks in India, Bank Credit & Systemic Credit, Financial Analysis including CASA Ratio, Gross and Net NPA's, ATMs and Branches penetration comparison of HDFC Bank with State Bank of India, Bank of Baroda, ICICI Bank, AXIS Bank and Canara Bank, Deposits & Advances, Interest Incomes & Expanded, Business Model of HDFC Bank, Merger & Acquisition and Revenue Stream and Expansion Plans.

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HDFC Bank Financial Analysis & Industry Comparison 2017

  1. 1. 09 February 2017 H A R S H B O H R A Financial Analysis and Industry Comparison
  2. 2. Table of Contents I. Characteristics of Industry 1. Industry Structure 2. Classification of Banks 3. 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 Ratio 2. Return on Assets 3. Gross NPAs 4. Net NPAs 5. ATMs 6. Branches 7. HDFC Bank - Overview 8. Branch Classification 9. Deposits & Advances 10. Interest Incomes & Expended III. Business Model 1. Business Model 2. Delivery Channel 3. Merger & Acquisition 4. Business Strategies 5. The People’s Bank IV. Revenue Stream & Expansion Plans 1. Customer Segments 1. Retail Banking 2. Wholesale Banking 3. Treasury 2. Expansion Plans
  3. 3. Industry Structure MINISTRY 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  4. 4. Classification of Banks 20 Private Sector Banks 26 Public Sector Banks 43 Foreign Banks 56 Regional Rural Banks 1589 Urban Cooperative Banks 93,550 Rural Cooperative Banks Industry Overview Industry Growth Rate CASA Ratio Return on Assets Non Performing Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  5. 5. Growth in Deposits: Impact of Demonetization 23% 22% 17% 18% 15% 15% 15% 11% 7% 13% 11% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017P 2018P Growth in Deposits Industry Overview Industry Growth Rate CASA Ratio Return on Assets Non Performing Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  6. 6. 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  7. 7. 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 RATE SYSTEMIC CREDIT GROWTH RATE Industry Overview Industry Growth Rate CASA Ratio Return on Assets Non Performing Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  8. 8. 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  9. 9. Credit Growth for Private & Public Sector Bank 2009-10 2010-11 2011-12 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 Bank Public Sector Bank Industry Overview Industry Growth Rate CASA Ratio Return on Assets Non Performing Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  10. 10. Public Sector Bank – Growth Rate Rs in Billion Working Capital Loans Term Loans 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 15,221 19,746 19,216 23,759 22,990 27,746 27,178 31,620 31,036 36,316 33,606 40,276 CAGR 15.2% 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  11. 11. ATM Penetration 2012 2017 105 300 2,05,151 Total No. of ATMs in India Point of Sale *Source: RBI, Oct 2016 ATM per Million Industry Overview Industry Growth Rate CASA Ratio Return on Assets Non Performing Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  12. 12. 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  13. 13. 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 1.58 1.77 1.9 2 2.02 1.4 1.5 1.6 1.6 1.6 1 1 1 0.7 0.7 0.9 0.9 0.8 0.5 0.4 Industry Overview Industry Growth Rate CASA Ratio Return on Assets Non Performing Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  14. 14. 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  15. 15. 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  16. 16. ATMs 12054 13561 50039 14353 10463 HDFC BANK SBI BANK OF BARODA ICICI BANK AXIS BANK Industry Overview Industry Growth Rate CASA Ratio Return on Assets Non Performing Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  17. 17. Branches 1408 786 11,472 1409 2915 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  18. 18. Branch Classification: HDFC Bank 37 Million Customer Base Industry Overview Industry Growth Rate CASA Ratio Return on Assets Non Performing Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  19. 19. 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  20. 20. Deposits & Advances: HDFC Bank 2010-11 2011-12 2012-13 2013-14 2014-15 Rs in Million Deposits Advances 2,085,864 1,599,827 2,467,064 1,954,200 2,962,470 2,397,206 3,673,375 3,030,003 4,507,956 3,654,950 76.7% 79.21% 80.9% 82.4% 81.1% Industry Overview Industry Growth Rate CASA Ratio Return on Assets Non Performing Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  21. 21. Interest Incomes and Expended: HDFC Bank 2010-11 2011-12 2012-13 2013-14 2014-15 Rs in Million Interest Income Interest Expended 199,282 93,851 278,742 149,896 350,649 192,538 411,355 226,529 484,699 260,742 47.1% 53.8% 54.9% 55.1% 53.8% Industry Overview Industry Growth Rate CASA Ratio Return on Assets Non Performing Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  22. 22. 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  23. 23. Delivery Channel: HDFC Bank 27% 7% 13% 53% 2006 Branches Phone Banking Internet & Mobile ATM 11% 3% 71% 15% 2017 Industry Overview Industry Growth Rate CASA Ratio Return on Assets Non Performing Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  24. 24. 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  25. 25. Business Strategies Customer 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 Strategy Before - Strategic location for ATM Center - 58% Active Users use ATM once a month After - 10000+ ATMs in 2012 - 83% Active Users use ATM once a month Industry Overview Industry Growth Rate CASA Ratio Return on Assets Non Performing Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  26. 26. Business Strategies Mobile 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  27. 27. Business Strategies Industry Overview Industry Growth Rate CASA Ratio Return on Assets Non Performing Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  28. 28. Revenue Stream: Customer Segments CUSTOMER 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  29. 29. Revenue Stream: Customer Segments CUSTOMER 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  30. 30. Revenue Stream: Customer Segments CUSTOMER 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  31. 31. Revenue Stream: Customer Segments CUSTOMER 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  32. 32. 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 Assets Branch & ATM Penetration HDFC Bank Analysis Business Model Business Strategies The People’s Bank Revenue Stream Expansion Plans
  33. 33. 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
  34. 34. THANK YOU H A R S H B O H R A

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