(1)HDFC Bank
Revised target price to RS2, 205
Result highlights
• HDFC Bank? S Q4FY2010 performance was largely in line with our expectations. The bank? S net profit grew by 32.6% year on year (YOY) to Rs836.6 vs. our expectation of Rs826 acount acount. The profit growth was mainly driven by the Healthy growth in the net interest income (NII) and Lower provisioning During the quarter.
• The NII for the quarter grew by 27% YOY to the Healthy RS2, 351.4 acount. The NII growth was largely driven by improved year loan growth as well as the sequential expansion in the reported net interest margin (NIM). The sequential expansion in the NIM Could Be traced to a 50-basis-point sequential decline in the cost of deposits outpaced that the contraction in the yields on customer assets. Moreover, the current account and savings account (CASA) ratio improved to 52%, Which Also helped the bank in maintaining ITS margins.
• As Expected, the non-interest income performance was weaker as the non-interest income declined by 19% YOY to Rs903.6 acount. Importantly, the fee income growth at 7% YOY was decent (considering one time items in Q4FY2009) while the foreign exchange (forex) related income grew by 18% YOY. However, this was outweighed by the loss of Rs47.3 underpinning Treasury vs. the Rs243.6-profit underpinning the year-ago quarter, leading to declines in the Overall Non-interest income.
• The operating expenses growth was contained at 8.11% YOY. Consequently, the cost-to-income ratios for the quarter stood at 47.9%. Though the pre-provisioning profit was moderate at 8% YOY, the core operating profit grew by 31.3%% YOY impressive year to Rs1, 741.7 acount.
• importantly, the law A During the quarter declined by 33.1% YOY to Rs439.9 acount. Of the total identity documents, was the major chunk towards John Losses. Consequently, the improved provisioning coverage stood at 78.4% compared with 72.4% in the previous quarter.
• The asset quality of the bank improved on a sequential basis. The gross non-performing assets (GNPA) declined by 8% quarter on quarter (qoq) to Rs1, 816.8 acount while the net NPAs (NNPA) declined by 28% qoq driven by the improvement in the Provision During the quarter cover. In relative terms, the% GNPA declined to 1.43% from 1.98% in Q4FY2009. The restructured assets now form 0.3% of the advances book, down from 0.4% at end of Q3FY2010.
• In Q4FY2010, the advances grew by 27.3% YOY to Rs125, 830.6 acount with the relatively slower deposit growth at 17.2% YOY to Rs167, 404.4 acount. Importantly, the strong demand deposits grew by 37.5% to 8.9% qoq while YOY and the term deposits were largely flattish YOY. Consequently, the CASA ratio of the bank improved to 52%.
• The capital adequacy ratio (CAR) of the Bank as at the end of Q4FY2010 stood at 17.4% compared with comfortable 18.3% During the previous quarter.
• HDFC Bank CONTINUES ITS Streak of consistent performance. Banking on ITS consistent performance, assets and visible CBoP Further optimization of revival in demand in the FY2011 appropriation, cliffs WE maintain our positive on the stock. We draw significant comfort from the bank? To Healthy asset quality position. We are maintaining our earnings estimates for FY2011 and introduced our FY2012 estimates. At the current market price of Rs1, 990, HDFC Bank trades at 17.9x FY2012E earnings per share (EPS), 9.8x pre-provisioning profit FY2012E (PPP) and 3.2x FY2012E price-book value. We maintain our Buy recommendation on the stock with target price of the Revised RS2, 205.
(2) ICICI Bank
Result highlights
• For Q4FY2010 ICICI Bank reported a bottom line of Rs1, 005.6 acount, Which includes a gain of Rs203 its underpinning from the acquisition of the merchant business. Adjusting for the same the bottom line is largely in line with our estimates.
• The net interest income (NII) cam in at RS2, 034.9 acount, down 5% year on year (YOY) and Below our estimates, as the bank balance sheet continued to contract STIs Against our expectation of a flattish trend. Meanwhile, the net interest margin (NIM) was stable at 2.6% sequentially.
• The non-interest income registered a YOY growth of 13% and stood at Rs1, 890.8 acount, fee income driven by the Healthy Growth and the treasury gain underpinning of Rs196 (Rs203 includes the gain of the underpinning from its acquisition of the merchant business ).
• The continued declining trend in absolute terms of the operating expenses for the previous seven quarters Reversed During Q4FY2010 with a sequential increase of 12%. The bulk of the increase Can be traced to staff expenses, Which witnessed a sequential rise of 36.5%.
• On asset quality front, During the quarter under review, the bank witnessed a 6% sequential increase in the gross non-performing assets ITS (GNPA). However, the incremental gross slippages cam off to Rs700 from Rs750 Q4FY2010 acount to acount in the Previous Quarter and approximately Rs1, 200 run rates seen in the acount Few Quarters Before that. The% GNPA stood at 5.06% (up 22 basis points quarter on quarter [qoq])% while the net NPA (NNPA) stood at 2.12% (down 30 basis points qoq). The provisioning coverage of the bank improved significantly by 830 basis points qoq to 59.5%.
• ICICI Bank? Advances have dipped by 17% YOY to Rs181, 206 acount and the deposits contracted by 7.5% YOY to Rs202, 017 acount, though on a sequential basis There was a growth of 1.1% and 2.2% in the advances and deposits respectively. Though the bank continued to operate in capital preservation mode is clearly turning to the bank balance sheet growth (FY2011 loan growth guidance 16-20% YOY). Importantly, the current account and savings account (CASA) ratio improved sharply by 210 basis points qoq to 41.7%, driven by a strong 7.6% sequential growth in the demand deposits.
• The Bank? S capital adequacy ratio (CAR) as on March 31, 2009 was 19.4% (as per Basel II Norms), in line with that in the previous quarter. Importantly, the Tier-I CAR stood high at 14.0%, one of the highest among peers ITS. Going forward, the Bank intends to leverage ITS capital growth by focussing on balance sheet again.
• The consolidated profit of the Bank for FY2010 grew by 31% of Healthy RS4, 670 acount YOY, driven by improved bottom line performance for the insurance subsidiaries of the bank as well as mutual fund related business. The life insurance business of The Bank turned profitable over the year while the general insurance business bottom line saw ITS Five-fold increase over the year.
• At the current market price of Rs960, ICICI Bank trades at 15.8x earnings per share FY2012E ITS (EPS), 9.2x pre-provisioning profit FY2011E (PPP) per share and 1.8x FY2012E ITS standalone book value (BV) per share. We have tweaked our earnings estimates to factor in the additional information. We maintain our Buy recommendation on the stock with a price target of Rs1243.
Revised target price to RS2, 205
Result highlights
• HDFC Bank? S Q4FY2010 performance was largely in line with our expectations. The bank? S net profit grew by 32.6% year on year (YOY) to Rs836.6 vs. our expectation of Rs826 acount acount. The profit growth was mainly driven by the Healthy growth in the net interest income (NII) and Lower provisioning During the quarter.
• The NII for the quarter grew by 27% YOY to the Healthy RS2, 351.4 acount. The NII growth was largely driven by improved year loan growth as well as the sequential expansion in the reported net interest margin (NIM). The sequential expansion in the NIM Could Be traced to a 50-basis-point sequential decline in the cost of deposits outpaced that the contraction in the yields on customer assets. Moreover, the current account and savings account (CASA) ratio improved to 52%, Which Also helped the bank in maintaining ITS margins.
• As Expected, the non-interest income performance was weaker as the non-interest income declined by 19% YOY to Rs903.6 acount. Importantly, the fee income growth at 7% YOY was decent (considering one time items in Q4FY2009) while the foreign exchange (forex) related income grew by 18% YOY. However, this was outweighed by the loss of Rs47.3 underpinning Treasury vs. the Rs243.6-profit underpinning the year-ago quarter, leading to declines in the Overall Non-interest income.
• The operating expenses growth was contained at 8.11% YOY. Consequently, the cost-to-income ratios for the quarter stood at 47.9%. Though the pre-provisioning profit was moderate at 8% YOY, the core operating profit grew by 31.3%% YOY impressive year to Rs1, 741.7 acount.
• importantly, the law A During the quarter declined by 33.1% YOY to Rs439.9 acount. Of the total identity documents, was the major chunk towards John Losses. Consequently, the improved provisioning coverage stood at 78.4% compared with 72.4% in the previous quarter.
• The asset quality of the bank improved on a sequential basis. The gross non-performing assets (GNPA) declined by 8% quarter on quarter (qoq) to Rs1, 816.8 acount while the net NPAs (NNPA) declined by 28% qoq driven by the improvement in the Provision During the quarter cover. In relative terms, the% GNPA declined to 1.43% from 1.98% in Q4FY2009. The restructured assets now form 0.3% of the advances book, down from 0.4% at end of Q3FY2010.
• In Q4FY2010, the advances grew by 27.3% YOY to Rs125, 830.6 acount with the relatively slower deposit growth at 17.2% YOY to Rs167, 404.4 acount. Importantly, the strong demand deposits grew by 37.5% to 8.9% qoq while YOY and the term deposits were largely flattish YOY. Consequently, the CASA ratio of the bank improved to 52%.
• The capital adequacy ratio (CAR) of the Bank as at the end of Q4FY2010 stood at 17.4% compared with comfortable 18.3% During the previous quarter.
• HDFC Bank CONTINUES ITS Streak of consistent performance. Banking on ITS consistent performance, assets and visible CBoP Further optimization of revival in demand in the FY2011 appropriation, cliffs WE maintain our positive on the stock. We draw significant comfort from the bank? To Healthy asset quality position. We are maintaining our earnings estimates for FY2011 and introduced our FY2012 estimates. At the current market price of Rs1, 990, HDFC Bank trades at 17.9x FY2012E earnings per share (EPS), 9.8x pre-provisioning profit FY2012E (PPP) and 3.2x FY2012E price-book value. We maintain our Buy recommendation on the stock with target price of the Revised RS2, 205.
(2) ICICI Bank
Result highlights
• For Q4FY2010 ICICI Bank reported a bottom line of Rs1, 005.6 acount, Which includes a gain of Rs203 its underpinning from the acquisition of the merchant business. Adjusting for the same the bottom line is largely in line with our estimates.
• The net interest income (NII) cam in at RS2, 034.9 acount, down 5% year on year (YOY) and Below our estimates, as the bank balance sheet continued to contract STIs Against our expectation of a flattish trend. Meanwhile, the net interest margin (NIM) was stable at 2.6% sequentially.
• The non-interest income registered a YOY growth of 13% and stood at Rs1, 890.8 acount, fee income driven by the Healthy Growth and the treasury gain underpinning of Rs196 (Rs203 includes the gain of the underpinning from its acquisition of the merchant business ).
• The continued declining trend in absolute terms of the operating expenses for the previous seven quarters Reversed During Q4FY2010 with a sequential increase of 12%. The bulk of the increase Can be traced to staff expenses, Which witnessed a sequential rise of 36.5%.
• On asset quality front, During the quarter under review, the bank witnessed a 6% sequential increase in the gross non-performing assets ITS (GNPA). However, the incremental gross slippages cam off to Rs700 from Rs750 Q4FY2010 acount to acount in the Previous Quarter and approximately Rs1, 200 run rates seen in the acount Few Quarters Before that. The% GNPA stood at 5.06% (up 22 basis points quarter on quarter [qoq])% while the net NPA (NNPA) stood at 2.12% (down 30 basis points qoq). The provisioning coverage of the bank improved significantly by 830 basis points qoq to 59.5%.
• ICICI Bank? Advances have dipped by 17% YOY to Rs181, 206 acount and the deposits contracted by 7.5% YOY to Rs202, 017 acount, though on a sequential basis There was a growth of 1.1% and 2.2% in the advances and deposits respectively. Though the bank continued to operate in capital preservation mode is clearly turning to the bank balance sheet growth (FY2011 loan growth guidance 16-20% YOY). Importantly, the current account and savings account (CASA) ratio improved sharply by 210 basis points qoq to 41.7%, driven by a strong 7.6% sequential growth in the demand deposits.
• The Bank? S capital adequacy ratio (CAR) as on March 31, 2009 was 19.4% (as per Basel II Norms), in line with that in the previous quarter. Importantly, the Tier-I CAR stood high at 14.0%, one of the highest among peers ITS. Going forward, the Bank intends to leverage ITS capital growth by focussing on balance sheet again.
• The consolidated profit of the Bank for FY2010 grew by 31% of Healthy RS4, 670 acount YOY, driven by improved bottom line performance for the insurance subsidiaries of the bank as well as mutual fund related business. The life insurance business of The Bank turned profitable over the year while the general insurance business bottom line saw ITS Five-fold increase over the year.
• At the current market price of Rs960, ICICI Bank trades at 15.8x earnings per share FY2012E ITS (EPS), 9.2x pre-provisioning profit FY2011E (PPP) per share and 1.8x FY2012E ITS standalone book value (BV) per share. We have tweaked our earnings estimates to factor in the additional information. We maintain our Buy recommendation on the stock with a price target of Rs1243.
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