HDFC Bank

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HDFC Bank Analysis.

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  • The major factors for increasing CAR can be as follow:Raising Capital from Fresh issue of equity shares:Internal generations of funds (Retained Earnings):HDFC bank has a policy of retaining 78% of its earnings and using the funds for advances. Due to higher retention of earnings bank is maintaining higher CAR.Risk Weighted Assets:HDFC bank has given more loans with risks during the years. HDFC Bank has issued loans in huge quantity therefore the risk weight of CAR has increased considerably.
  • Employee per branch for HDFC Bank (merged) has moved up from 17 in FY04 to 39 in FY08. This coupled with high wage inflation has led to significant increase in employee cost to assets ratio. Going ahead, we expect employee per branch to stabilise at current levels and wage inflation to moderate leading to improvement in cost ratios for HDFC Bank.
  • ): For banks, interest expenses are their main costs (similar to manufacturing cost for companies) and interest income is their main revenue source. The difference between interest income and expense is known as net interest income. It is the income, which the bank earns from its core business of lending. Net interest margin is the net interest income earned by the bank on its average earning assets. These assets comprises of advances, investments, balance with the RBI and money at call. Margin expansion was contributed by increase in yields across all products partially offset by increase in time deposit costs.  NIM = Interest income – Interest expenses ------------------------------------ Average earning assetsBank NIM has been increasing due to high interest loan advances and low cost deposits . Increasing signifies that bank has been successfully able to able to deploy its average earning assets to generate more revenues.
  • This ratio also tells us about the good earning quality of the bank. We can see that the banks operating profit as a percentage of average working funds has been increasing which tells that banks has been is
  • HDFC Bank

    1. 1. Analysis<br />1<br />
    2. 2. Overview of HDFC Bank<br /><ul><li>Housing Development Finance Cooperation Ltd.
    3. 3. 1st – Bank to receive an “in principle approval” from RBI.
    4. 4. Incorporated in August 1994,in the name of “HDFC Bank Ltd.”
    5. 5. 1st – Registered Office in Mumbai
    6. 6. HDFC Bank commenced operations as a Scheduled</li></ul> Commercial Bank in January 1995.<br />2<br />
    7. 7. Business Focus<br />MISSION :<br /> “World Class Indian Bank”. <br />- OBJECTIVE : <br /> Maintain Ethical Standards, Professional Integrity &<br /> Cooperate Governence.<br /><ul><li>Business Philosophy : Based on 4 Core Values - </li></ul> a) Operational Excellence<br /> b) Customer Focus<br /> c) Product Leadership <br /> d) People<br />3<br />
    8. 8. Capital Structure and Shareholding Pattern<br /><ul><li> The authorized capital of HDFC Bank is Rs550 crore( Rs 5.5bn) Paid-up capital is Rs 424.6 crore (Rs 4.2 bn).
    9. 9. The HDFC Group holds 19.4% of the bank's equity.
    10. 10. 28% of the equity is held by FIIs.
    11. 11. 11.86% is held by the General Public.
    12. 12. The Bank has about 570,000 shareholders.
    13. 13. The shares are listed on the BSE & NSE.
    14. 14. The bank's American Depository Shares are listed on the New York Stock Exchange (NYSE) under the symbol ‘HDB’.</li></ul>4<br />
    15. 15. Strong Vast Network<br />5<br />
    16. 16. Wide Range of Products<br />6<br />RETAIL BANKING<br /><ul><li>Loan Products: Depository Products </li></ul> - Auto Loans - Savings<br /> - Loans against Securities - Current<br /> -Personal Loans - Fixed Deposits<br /> - Credit Cards<br /> - 2-Wheeler Loans<br /> - Home Loans<br /> - Commercial Vehicles Finance <br />Other Products / Services: -- POS Terminals<br />- Debit Cards<br />- Depository Accounts<br />- Mutual Fund Sales<br />- Insurance Sales<br />- NRI Services<br />- Bill Payment Services<br />V<br />Commercial Banking:<br /> - Working Capital<br /> - Credit Substitutes<br /> - Term Loans<br /> - Bill Collection<br /> - Forex & Derivatives<br /> - Wholesale Deposits<br /> -Letters of Credit<br /> - Guarantees<br />Transactional Banking:<br /> - Cash Management<br /> - Custodial Services<br /> - Clearing Bank Services<br /> - Correspondent Banking<br /> - Tax Collections<br /> - Banker to public issues<br />Key Segments:<br /> - Large corporate<br /> - Supply Chain<br /> - Emerging Coop<br /> - Financial Inst<br /> - Government<br />Wholesale Banking<br />Products: Other Functions:<br /> - Foreign Exchange - Asset Liability Management<br /><ul><li> Debt Securities - Statutory Reserve Management
    17. 17. - Derivatives
    18. 18. - Equity</li></ul>Treasury<br />One – Stop Shop to meet Diverse Customer Needs<br />
    19. 19. 7<br />
    20. 20. 8<br />
    21. 21. 9<br />
    22. 22. 10<br />
    23. 23. Business Model<br />HDFC BANK<br />RETAIL<br />WHOLESALE<br />TREASURY<br />REVENUE<br /> INTEREST REVENUE <br />NON- INTEREST<br />Less:<br /> INTEREST & NON-INTEREST EXPENSES<br />NET INTEREST INCOME<br />NON INTEREST INCOME<br />
    24. 24. Income Statement<br />12<br />
    25. 25. Deposits<br />13<br />In Crores<br />
    26. 26. Net Worth of HDFC Bank<br />14<br />
    27. 27. 15<br />
    28. 28. 16<br />
    29. 29. Implications of important terms<br />CRR – 7.5% -- Affects Liquidity<br />SLR – Min. 25% -- Affects Liquidity and secure insolvency<br />REPO RATE – 9% -- Affects Lending rates and Liquidity<br />REVERSE REPO RATE – 6% -- Affects Liquidity<br />17<br />
    30. 30. Key Financial Ratios<br />
    31. 31. MERGER OF CBOP WITH HDFC BANK<br />
    32. 32. CBoP = HDFC <br /><ul><li> On May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank was formally approved by RBI.
    33. 33. Shareholders of CBoP received 1 share of HDFC Bank for every 29 shares of CBoP, valuing CBoP at INR 95bn.
    34. 34. The balance sheet size of the combined entity would be over Rs. 1,63,000 crore.</li></ul>20<br />
    35. 35. Future Expected EarningsPost Merger *estimates provided by Indiabulls Research<br />21<br />
    36. 36. Camel’s Approach<br />
    37. 37. Camel’s Approach<br />It is a method for evaluating bank performance and healthy position of the bank since it considers all areas of banking operations.<br />Camel Means<br /><ul><li>C = “Capital Adequacy Ratio”
    38. 38. A= “Asset quality”
    39. 39. M= “Management quality”
    40. 40. E= “Earnings quality”
    41. 41. L= “Liquidity”</li></li></ul><li>Capital Adequacy Ratio <br /><ul><li> HDFC BANK has maintained Capital Adequacy ratio of more than 13% which is above the RBI norms of 9%.
    42. 42. Maintaining higher CAR will ensure high expansion possibilities as and when opportunity arises for HDFC bank.</li></li></ul><li>Asset Quality<br />Non Performing Asset means an asset or account of borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset.<br />
    43. 43. Management Quality<br />
    44. 44. Earnings quality<br />Net Interest Margin difference between interest income and interest expenses, usually expressed as a percentage of average earning assets.<br />
    45. 45. Earnings quality<br />
    46. 46. Liquidity<br />
    47. 47. HDFC v/s SENSEX – 1 year<br />30<br />
    48. 48. 31<br />
    49. 49. “Thank You”<br />32<br />

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