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HDFC Bank
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Organizational Structure
HDFC Bank is a professionally managed organization with a board of directorsconsisting of eminent persons, focusing on strategy formulation, policy and
control, designed to deliver increasing value to stakeholders.
To Become a World Class Indian Bank with focus on OperationalExcellence, Customer, Product Leadership and People
Building sound customer franchises across distinct businesses so so as to bethe preferred provider of banking services for target retail and wholesalecustomer segments, and to achieve healthy growth in profitability, consistentwith the banks risk appetite
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Business Lines
WholesaleBanking
Treasury
RetailBanking
DepositProducts
Other Products
/ServicesLoanProducts
Commercial BankingTransactional
BankingKey Segments
Products/Segment
Other Functions
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Target Customer Segments
Customer base of 26 Mn,Nationwide network, withexpanding semi-urban and ruralfootprint
Large Corporates
Emerging Corporates
Financial Institutions
Govt./PSUs
Supply Chain (Suppliers &Dealers)
Agriculture throughcustomized loans & depositproducts
Commodities
Accessing Multiple Segments Leveraging relationships with large & emerging corporates for multiple revenue
streams
Focus on house banking
Balanced mix between working capital finance, term loans and transactional banking
Well diversified loan portfolio across major industry segments
Leading provider of electronic banking services for supply chain management
Structured cash management-cum-vendor/distributor finance
Leading cash management solutions provider to:
1. Large corporates and SME2. Financial Institutions
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Reserve Bank of India
Key Regulators
-The Bank is governed by the Banking Regulation Act 1949, and circulars
and guidelines issued by the Reserve Bank of India from time to time.
-The Annual Financial Inspection (AFI) focuses on statutorily mandatedareas of solvency, liquidity and operational health of the bank. It is basedon the CAMEL model.
Securities Exchange Board of India
-Makes mandatory disclosures w.r.t. SEBI (Prohibition of Insider Trading )Regulations, 1992 & public issues managed by it in its role as a merchantbanker besides others
-Comes in SEBIs List of Registered custodians of securities- IPO scam of2006
- The plan for ESOPs for Employees and director of the bank is inaccordance with the SEBI guidelines,1999
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Capital Structure
Details of Equity ShareCapital
Details ofTier-I
Capital(11.6% inFY12)
The HDFC Group holds around23.15% of the banks equityand about 17.29% of it is heldby the ADR/GDR Depositories.
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Total Deposits increased 18.3% from 208,586crore as on March 31, 2011 to ` 246,706 crore ason March 31, 2012.
The proportion of core current and savingsdeposits (CASA) to total deposits was at 48.4% ason March 31, 2012.
Total advances: 195,420 crore. An increase of22.2% compared to the previous year.
Non Performing Assets: 1,999 crore (gross); 1.0%of Gross Advances.
Total Capital Adequacy Ratio (CAR) calculated inline with Basel II framework stood at 16.5%, wellabove the regulatory minimum of 9.0%. Of this,
Tier I CAR was 11.6%.
Growth in balance sheet size by 22%
Liability Profile: Strong Retail Customer Acquisition
Deposit Mix (%)
Power of strong liabilityfranchise demonstrated from
higher and stable share of retaildeposits.
Customer acquisition throughaggressive branch expansionprovides continuous growth.
Quality growth as average
saving balance per accountstable close to Rs 50 000.
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Stable Profitability Ratios
Reported NIM (%)
Other Income -at30% of Net Revenuesin FY 2012Primary drivers: Commissions from the
distribution of fees ondebit & credit cards. transactional chargesand fees on depositaccounts, processingfees on retail assets.
44.8% growth inforex derivatives
Fees &Commissions
81%FX &
DerivativesRevenues 22%,
Loss on saleof Investments(3%)
Growth in PAT by 31.6% inFY12
Stable NIM: Among lowest depositcosts in industry (10-11bp impact onmargins)
Deposit rate notincreased despitederegulation, yetGrowth in savingsdeposits by 16.6%.
High RoA:
Strong core operatingperformance and low
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Balance Sheet Assets side Analysis
Segment wise NPA (%)
The performance on asset qualityremains impeccable with GNPA at
1% and NNPA at 0.2% NPAs increased marginally in agriand allied activities, but declinedacross other sectors.
Specific provision cover at 82% ofNPAs, total provision cover of over
100%
Slippage ratio and credit cost atcyclical lows, floating provisionscoverage at 200 %.
First mover advantage andrelatively better retail loancycle, access to database ofCIBIL, healthy competition, etcare helping HDFC report lowestslippage ratio in a decade.
More than 70% of the assetsare low risk weight whichremains largely stable
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Healthy Asset Mix : Focus on Retail
Retail loan mix'12 (%)
Loan growth was driven by an increaseof 33.7% in retail advances to 107,126crore, and an increase of 10.5% inwholesale advances to 89,764 crore.Wholesale segment growth: HighCross Selling Cash management business(vols of 25trillion)
Cash settlement services for majorstock exchanges and commodityexchanges.
Vendor & distributor finance products. Asset book over USD 1.7 bn throughoverseas branches.Retail Segment growth: offset byhigh operational expenses
Auto Finance key driver. Focus on internal customers for creditcard portfolio. Biggest credit cardissuer in FY 12 (5.6 million cards as onMarch 31,2012).
Volume increase in distribution of
insurance and mutual funds offsetdrop in commission rates.
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Risk Management : Credit, Operational andMarket RiskCredit Risk Management: Standardized Approach
Retail Credit: credit cycle is managed through appropriate front-end credit,operational and collection processes. Monitored largely on a portfolio basis,
across various products and customer segments.Wholesale Credit: target market definition, appropriate credit approval processes,ongoing post-disbursement monitoring and remedial management procedures.
Operational Risk Management: Basic Indicator ApproachTo mitigate operational risks bank has in place --extensive internal controlsincluding restricted access to the Banks computer systems, appropriate
segregation of front and back office operations and strong audit trails. BCPcommittee for disaster recovery.
Market Risk Management: Standardized ApproachRisks assumed by treasury desks are within the stipulated risk limits defined bymarket risk unit based on budgeted revenues for each desk. Risk Policy &
Monitoring Committee (RPMC) responsible for evaluates and monitors bank riskpolicy and controls.
Interest Rate Risk Management: risk identification, limits setting and riskmonitoringMeasured and controlled using both earnings perspective (traditional gapanalysis) and economic value perspective (duration gap analysis) based on limitsprescribed by RBI.
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Competitor Analysis: HDFC healthiest of thelot
HDFC recorded the highest Current Account-Savings Account (CASA)
ratio (48.4%) indicating that it continues to find ways to access low costfunds to ramp up its growth.
HDFC also had a higher Net interest margin (for the March 2012 quarter)of 4.2%, compared with 3.55% and 3.01% for Axis Bank and ICICI Bank,respectively.
In HDFC Banks case, the quantum ofRestructured assets stood at 0.4%of the gross advances which was significantly lower than axis bank(high riskassets to boost bottomline) and ICICI bank(owing larger base).
ICICI Bank had the highest Net Non-Performing Assets (NNPA) of 0.62%
compared with just 0.25% and 0.20% for Axis Bank and HDFC Bank,respectively. ICICI had highest net profit (Rs 6465 crore) than the other two,
Parameters Axis bank HDFC bank ICICI Bank
Market cap( Rs in crore) 44,548.71 138681.19 1,08,715.06
Net profits( consolidated) (Rs in crore) 4242.18 5247 6465.26
CASA ratio 42% 48.40% 42.50%Asset quality (NNPA) 0.25% 0.20% 0.62%
CAR( Capital Adequacy) 13.66% 16.50% 18.52%
PCR(Provision Coverage ratio) 80.91% 82.40% 80.40%
Credit growth 19% 22% 17%
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Stable ALM Profile
Strong control over ALM led by higher proportion of granular retail deposits.Proportion of deposits maturing in one year remains stable in last three yearsat ~30%
FY 2012 (%) FY 2011 (%)
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Branch expansion, productpenetration key growth
mantras
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Zones of Action-Long termsustainability
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Value Proposition: The wayahead
Source: HDFC Report 2012
i i i b ld l
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Mission is to be "a World ClassIndian Bank"
The strategicalliance will help
HDFC Bank topenetrate in rural
India throughCamson'sdealershipnetwork.
Enhanced customer base ofcorporate customers anddeveloping long termrelationship with the HNIsleading to growth
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"Healthcare
sector in Indiastands at USD17 billion and itis growing at arate of 13 percent," : Rao
"We aim toperform betterthan industry'sgrowth in terms
of spending fornext three years@ 15 to 20%.