2QFY2012 Result Update | Banking

October 19, 2011

HDFC Bank
Performance Highlights

Particulars (` cr) NII Pre-prov. profit PAT 2QFY12 2,945 2,126 1,199 1QFY12 2,848 2,033 1,085 % chg (qoq) 3.4 4.5 10.5 2QFY11 2,526 1,807 912 % chg (yoy) 16.6 17.6 31.5

ACCUMULATE
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Banking 1,14,696 1.0 520/396 1,29,524 2 17,085 5,139 HDBK.BO HDFCB@IN

`491 `519
12 months

Source: Company, Angel Research

For 2QFY2012, HDFC Bank reported healthy 31.5% yoy growth in net profit to `1,199cr, inline with our as well as street estimates. Moderate NIM compression coupled with largely stable asset quality was the key highlight of the results. We maintain our Accumulate recommendation on the stock. Another quarter of steady performance: Adjusting for the short-term one-off wholesale loans, gross advances growth moderated a bit to 25.6% yoy. Deposits accretion picked up to 18.1% yoy, primarily driven by rise in fixed deposits (which have accounted for 71.1% of the incremental deposits over the last one year), while moderation in CASA growth to 10.3% led to a decline in CASA ratio to 47.3% from 49.1% in 1QFY2012. The bank was able to restrict the reported NIM compression to a marginal 10bp qoq at 4.1% in spite of the sharp rise in FD interest rates and the migration of CASA balances to FDs. The asset quality remained largely stable with the gross and net NPA ratios remaining stable at 1.0% and 0.2%, respectively. Slippages were ~1.0% compared to 0.9% in 1QFY2012 and 0.8% in FY2011. NPA coverage excluding technical write-offs remains at an elevated 81.3% (82.6% in 1QFY2012). During the quarter, the bank made floating provisions of ~`240cr, representing a significant 13.6% of the PBT. Branch expansion continued the traction, with opening of 164 branches in 1HFY2012 to take the network to 2,150 branches. Outlook and valuation: We believe HDFC Bank is well positioned for high qualitative growth, with strong CAR, healthy 20%+ branch expansion and robust asset quality. On the back of this, in our view, the bank is set to further gain credit and CASA market share. However given the current valuations at 3.3x FY2013E ABV, we believe that the positives are largely factored in the price and the upside is likely to be limited from the current levels. Hence, we maintain our Accumulate recommendation on the stock with a target price of `519, implying an upside of 5.7% from the current levels.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 23.2 11.0 47.7 18.1

Abs. (%) Sensex HDFC Bank

3m (8.4) (3.9)

1yr (14.5) 3.8

3yr 71.3 139.8

Key financials
Y/E March (` cr) NII % chg Net profit % chg NIM (%) EPS (`) P/E (x) P/ABV (x) RoA (%) RoE (%)
Source: Company, Angel Research

FY2010 8,386 13.0 2,949 31.3 4.3 12.9 38.1 5.2 1.5 16.1

FY2011 10,543 25.7 3,926 33.2 4.4 16.9 29.1 4.5 1.6 16.7

FY2012E 12,240 16.1 5,131 30.7 4.2 22.1 22.3 3.9 1.6 18.8

FY2013E 15,142 23.7 6,682 30.2 4.2 28.7 17.1 3.3 1.7 20.9 Shrinivas Bhutda
022 3935 7800 Ext: 6845 [email protected]

Vaibhav Agrawal
022 3935 7800 Ext: 6808 [email protected]

Varun Varma
022 3935 7800 Ext: 6847 [email protected]

Please refer to important disclosures at the end of this report

HDFC Bank | 2QFY2012 Result Update

Exhibit 1: 2QFY2012 performance

Particulars (` cr) Interest earned - on Advances / Bills - on investments - on balance with RBI & others - on others Interest Expended Net Interest Income Other income Other income excl. treasury - Fee & commission income - Treasury income - Forex & derivative income Operating income Operating expenses - Employee expenses - Other Opex Pre-provision Profit Provisions & Contingencies PBT Provision for Tax PAT Effective Tax Rate (%)
Source: Company, Angel Research

2QFY12 1QFY12 % chg (qoq) 2QFY11 % chg (yoy) 6,718 4,995 1,618 33 72 3,773 2,945 1,212 1,213 988 (1) 218 4,156 2,030 823 1,207 2,126 366 1,760 560 1,199 31.8 5,978 4,514 1,411 25 28 3,130 2,848 1,120 1,161 923 (41) 230 3,968 1,935 781 1,154 2,033 444 1,590 505 1,085 31.7 12.4 10.6 14.7 32.6 154.2 20.5 3.4 8.2 4.4 7.1 (96.9) (5.3) 4.7 4.9 5.4 4.7 4.5 (17.5) 10.7 11.0 10.5 10bp 4,810 3,673 1,100 35 1 2,284 2,526 961 1,013 857 (52) 152 3,487 1,680 711 969 1,807 454 1,353 440 912 32.6 39.7 36.0 47.1 (7.1) 6,425.5 65.2 16.6 26.1 19.8 15.3 (97.5) 43.1 19.2 20.9 15.8 24.6 17.6 (19.5) 30.1 27.2 31.5 (72)bp

Exhibit 2: 2QFY2012 Actual vs. estimates

Particulars (` cr) Net interest income Other income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Source: Company, Angel Research

Actual 2,945 1,212 4,156 2,030 2,126 366 1,760 560 1,199

Estimates 2,982 1,172 4,154 2,043 2,111 350 1,761 573 1,188

Var. (%) (1.3) 3.4 0.1 (0.6) 0.7 4.4 (0.1) (2.1) 0.9

October 19, 2011

HDFC Bank | 2QFY2012 Result Update

Exhibit 3: 2QFY2012 performance analysis

Particulars Balance sheet Advances (` cr) Deposits (` cr) Credit-to-Deposit Ratio (%) Current deposits (` cr) Saving deposits (` cr) CASA deposits (` cr) CASA ratio (%) CAR (%) Tier 1 CAR (%) Profitability Ratios (%) Reported NIM Cost-to-income ratio Asset quality Gross NPAs (` cr) Gross NPAs (%) Net NPAs (` cr) Net NPAs (%) Provision Coverage Ratio (%)
Source: Company, Angel Research

2QFY12 1QFY12 % chg (qoq) 2QFY11 % chg (yoy) 188,502 175,516 230,676 211,151 81.7 40,093 69,017 47.3 16.5 11.4 4.1 48.9 1,895 1.0 355 0.2 81.3 83.1 38,811 64,785 49.1 16.9 11.4 4.2 48.8 1,833 1.0 319 0.2 82.6 7.4 157,091 9.2 195,321 (141)bp 3.3 6.5 5.3 (176)bp (40)bp 0bp (10)bp 10bp 3.4 (4)bp 11.5 0bp (137)bp 80.4 39,363 59,525 98,888 50.6 17.0 12.7 4.2 48.2 1,841 1.2 409 0.3 77.8 20.0 18.1 129bp 1.9 15.9 10.3 (333)bp (50)bp (130)bp (10)bp 68bp 2.9 (16)bp (13.0) (10)bp 344bp

109,110 103,596

Strong business growth; moderate NIM compression

The banks net advances registered healthy 7.4% qoq growth. Adjusting for the short-term one-off wholesale loans, gross advances growth remained healthy at 25.6% yoy. According to the management, corporate loan growth was primarily driven by working capital loans and demand for capex loans has tapered off considerably over the past few quarters. Retail loans growth was also strong at 34.2% yoy despite the sharp rise in interest rates over the last one year. Yoy growth in retail loans was driven by CVCE, Business banking and home loans. On a sequential basis also, CVCE loans showed healthy traction, rising by a surprisingly high 25.3% qoq. The share of retail and corporate loans remained largely stable at 51:49.

Exhibit 4: Healthy growth in retail loans in spite of higher interest rates

Particulars (` cr) Auto Loans CVCE Two Wheelers Personal Loans Business Banking Loans Against Securities Credit Cards Home loans Others Retail Advances 2QFY12 1QFY12 % chg (qoq) 2QFY11 % chg (yoy) % to total 24,606 11,348 2,173 12,004 16,847 980 5,855 12,344 6,721 92,878 23,217 9,055 2,067 10,980 15,391 1,067 5,405 11,041 5,640 83,863 6.0 25.3 5.1 9.3 9.5 (8.2) 8.3 11.8 19.2 10.7 20,761 6,957 1,780 9,324 11,490 1,023 4,134 9,176 4,559 69,204 18.5 63.1 22.1 28.7 46.6 (4.2) 41.6 34.5 47.4 34.2 26.5 12.2 2.3 12.9 18.1 1.1 6.3 13.3 7.2 100.0

Source: Company, Angel Research

October 19, 2011

HDFC Bank | 2QFY2012 Result Update

Deposits accretion picked up pace, post the muted 1.2% qoq growth in 1QFY2012, rising by a healthy 9.2% qoq. The pace of CASA deposits accretion for the bank has moderated considerably over the past several quarters the trend continued in 2QFY2012 as well with growth of 10.3% yoy (as compared to 15.1% in 1QFY2012 and 31.1% in 2QFY2011). The decline in CASA deposit growth can be primarily attributed to the sharp rise in fixed deposit interest rates over the past one year. Current account deposit balances grew by a muted 1.9% yoy which dragged down the overall CASA balances growth. Overall CASA ratio remains amongst the best in the industry at 47.3% (49.1% in 1QFY2012 and 50.6% in 2QFY2011). Going forward, with the banks aggressive branch expansion (21.8% growth in branch network over the past one year), we expect CASA market share gains to pick up. The key positive from the results was the resilience of NIM; the bank witnessed a marginal 10bp qoq as well as yoy compression in NIMs (to 4.1%) which was lower than what peers have witnessed over the past few quarters. The migration of CASA balances to FDs on account of attractive interest rates led to an sharp uptick in cost of deposits for the bank. The bank was relatively aggressive in hiking its base rate, which went up from an average of 9.00% in 1QFY2012 to 9.75% in 2QFY2012. The management expects NIMs to remain largely stable in the 3.9-4.2% range in 3QFY2012. We expect the bank to largely sustain its NIM close to FY2011 levels on the back of its strong funding mix.

Exhibit 5: YoY Advances growth remains moderate

(%) 40.0 30.0 20.0 10.0 Advances
Source: Company, Angel Research

Exhibit 6: NIM declines albeit marginally

(%)

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

4.3 4.2 4.1 4.2 4.2 4.2 4.2 4.1

38.2

33.1

27.1

20.0

20.0

30.4

24.2

24.6

15.4

18.1

4.0 3.9

Deposits

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

Source: Company, Angel Research

Exhibit 7: CASA ratio slips on higher FD interest rates

(%)

Exhibit 8: CASA growth remains on moderating path

CASA growth (%) SA growth (%) 50.0 40.0 31.9 28.0 15.9

55.0 50.6 50.0 50.5

52.7 49.1 47.3

30.0 20.0 10.0 10.3

45.0

2QFY10

3QFY10

4QFY10

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

40.0 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12

Source: Company, Angel Research

Source: Company, Angel Research

October 19, 2011

2QFY12

HDFC Bank | 2QFY2012 Result Update

Other income growth picks up on the back of forex income and lower treasury losses
Other income growth for the bank was picked up from 12.3% yoy witnessed in 1QFY2012 to 25.8% yoy due to a healthy 43.1% yoy growth in foreign exchange / derivatives income and considerably lower treasury losses. Fee income growth remained moderate at 15.3% yoy.

Exhibit 9: Fee income growth at 15.3% yoy; Forex income rises sharply
Particulars (` cr) Fees & Commission Treasury Income Forex Income & Others Other income Other income excl. treasury
Source: Company, Angel Research

2QFY12 988 (1) 218 1,205 1,206

1QFY12 % chg (qoq) 923 (41) 230 1,112 1,153 7.1 (96.9) (5.3) 8.4 4.6

2QFY11 % chg (yoy) 857 (52) 152 957 1,009 15.3 (97.5) 43.1 25.8 19.5

Strong capital adequacy, branch expansion to drive credit and CASA market share gains, respectively
The banks total capital adequacy ratio (CAR) remained strong at 16.5%, with tier-1 constituting 69.1% of the total CAR. On the back of this strong CAR, we expect the bank to further improve its credit market share over FY201213. Accordingly, we expect the bank to record credit growth of 25-27% each in FY2012 and FY2013. Notwithstanding the recent moderation in pace of CASA deposits accretion, we expect the same to remain higher than the industry average over the coming quarters on the back of the banks aggressive branch expansion. The strong traction in CASA growth over the past one year can be attributed to the banks aggressive branch expansion during FY200910 and increasing productivity of CBoPs branch network. During the past three quarters alone, the bank has added 370 branches (increase of 20.8%), taking its branch network to 2,150. The bank has increased its presence to over 1,141 cities as compared to 819 cities as of 2QFY2011. In FY2012, the bank has plans to open 300-400 branches, out of which it has already opened 164 branches in 1HFY2012.

Exhibit 10: Healthy capital adequacy

Tier-I CAR (%) 20.0 15.0 10.0 5.0 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 12.7 12.1 12.2 11.4 11.4 17.0 4.3 16.3 4.2 Tier-II CAR (%) 16.2 4.0 16.9 5.5 16.5 5.1

Exhibit 11: Branch expansion gaining traction

Branches 2,250 2,000 1,750 1,500 4,721 5,121 5,471 5,998 ATMs (RHS) 6,520 7,500 6,000 4,500

1,765

1,780

1,986

2,111

2,150

1,250 1,000

3,000 1,500

2QFY11 3QFY11 4QFY11 1QFY12 2QFY12

Source: Company, Angel Research

Source: Company, Angel Research

October 19, 2011

HDFC Bank | 2QFY2012 Result Update

Asset quality remains largely stable

The bank maintained its strong asset quality track record during 2QFY2012 as well. Slippages were ~1.0% compared to 0.9% in 1QFY2012 and 0.8% in FY2011. Gross and net NPAs rose by relatively lower 3.4% yoy and 11.5% yoy, respectively. Gross and Net NPA ratios remained stable at 1.0% and 0.2%, respectively. NPA provision coverage ratio remained at elevated levels at 81.3%, even without considering the floating provisions. Significantly, the bank made `240cr of floating and general provisions during the quarter, taking the cumulative floating provisions to ~`1,000cr. Restructured advances grew by ~7.4% qoq (at 0.4% of gross advances) to ~`750cr. Out of the restructured advances bulk of the loans have already slipped into NPAs. The banks exposure to micro finance institutions (MFIs) stands at a marginal 0.2% of advances. Out of the ~`750cr of slippages witnessed in 1HFY2012, ~`250cr pertained to the MFI sector loans.

Exhibit 12: Stable asset quality

Gross NPAs (%) 1.5 1.2 0.9 70.0 0.6 0.3 60.0 81.4 77.8 82.5 82.6 81.3 80.0 Net NPAs (%) PCR (Calc, %, RHS) 90.0

1.2

0.3

1.1

0.2

1.1

0.2

1.0

0.2

1.0

0.0

0.2

50.0

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

Source: Company, Angel Research

Investment arguments
Strong capital adequacy, expanding network to sustain traction in credit market share and CASA deposits, respectively
In 2QFY2012, the banks capital adequacy stood strong at 16.5%, with tier-1 comprising a substantial 69.1%. On the back of this strong CAR, we expect the bank to increase its credit market share over FY201213. Accordingly, we expect the bank to record credit growth of 25-27% each in FY2012 and FY2013. The banks strong and profitable growth over the last six years (FY200511) was supported by significant traction in CASA market share (from 3.3% in FY2005 to ~6.0% in FY2011). The dominant transaction banking business lies at the core of the banks strength in CASA deposits. Moreover, aided by the merger of CBoP, the banks branch network moved up at a 30% CAGR during FY200611. We believe HDFC Bank would be in a position to further increase its CASA market share going ahead by increasing CASA mobilisation at the branches, expanding its network at a healthy pace and leveraging its comprehensive product range and strong brand.
October 19, 2011

HDFC Bank | 2QFY2012 Result Update

Comprehensive product portfolio, sustain traction in fee income

effective

cross-selling

to

Apart from the traditional CEB and forex income, the bank earns substantial fee income from transaction banking, cards and third-party distribution, among others. Overall, the banks core fee income increased at a 27.4% CAGR over FY200811 and stood at around 1.7% of ATA in FY2011, one of the best in the sector offering another significant competitive advantage to the bank.

Healthy in asset quality

The bank has been able to improve its asset quality consistently, as reflected in slippages, which declined from 5.2% in FY2009 to 1.1% during FY2011. Provisions to average assets also declined from 1.2% in FY2009 to 0.8% in FY2011. Even in 2QFY2012 slippages were under control at ~1.0% levels on an annualised basis. With the slowdown on the domestic growth front and heightened global macro risks, we expect slippages to rise from the current low levels. However, we believe that the bank is better placed vis--vis peers in tackling expected asset quality pressures considering the loan book mix and the healthy provision coverage ratio. Significantly, the bank made further `240cr of floating and general provisions during the quarter, taking the cumulative floating provisions to ~`1,000cr.

Valuations leave limited upside

We believe HDFC Bank is among the most competitive banks in the sector, with an A-list management at the helm of affairs, which has one of the best track records in the sector. We believe HDFC Bank is well positioned for high qualitative growth, with strong CAR, healthy 20%+ branch expansion and robust asset quality. On the back of this, in our view, the bank is set to further gain credit and CASA market share. Over the past 5 years, HDFC Bank has commanded an average premium to Sensex P/E multiple of ~31%. However considering the recent outperformance of HDFC Banks stock price, the premium has expanded to ~35%. Given the current valuations (3.3x FY2013E ABV), we believe that the positives are largely factored in the price and leave a limited upside in the stock price. Hence, we maintain our Accumulate recommendation on the stock with a target price of `519, implying an upside of 5.7% from the current levels.

October 19, 2011

HDFC Bank | 2QFY2012 Result Update

Exhibit 13: Key assumptions

Particulars (%) Credit growth Deposit growth CASA ratio NIMs Other income growth Growth in staff expenses Growth in other expenses Slippages Treasury gain/(loss) (% of investments)
Source: Angel Research

Earlier estimates FY2012 25.0 27.0 51.3 4.3 18.8 20.3 20.3 1.1 FY2013 28.0 28.0 49.6 4.2 27.2 25.2 25.2 1.1 0.0

Revised estimates FY2012 25.0 26.0 51.7 4.2 18.8 16.9 16.9 1.0 FY2013 28.0 28.0 50.0 4.2 27.2 23.8 23.8 1.0 0.0

Exhibit 14: Change in estimates

Particulars (` cr) NII Non-interest income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Source: Angel Research

Earlier estimates
12,509 5,152 17,661 8,601 9,060 1,524 7,536 2,451 5,085

FY2012 FY2013 Revised Revised Earlier Var. (%) Var. (%) estimates estimates estimates
12,240 5,152 17,392 8,362 9,030 1,426 7,604 2,473 5,131 (2.2) (1.5) (2.8) (0.3) (6.4) 0.9 0.9 0.9 15,504 6,556 22,060 10,769 11,291 1,558 9,733 3,165 6,568 15,142 6,552 21,694 10,352 11,342 1,439 9,903 3,220 6,682 (2.3) (0.1) (1.7) (3.9) 0.5 (7.6) 1.7 1.7 1.7

Exhibit 15: Angel EPS forecast vs. consensus

Year (`) FY2012E FY2013E
Source: Bloomberg, Angel Research

Angel forecast 22.1 28.7

Bloomberg consensus 21.6 27.3

Var. (%) 2.3 5.3

October 19, 2011

HDFC Bank | 2QFY2012 Result Update

Exhibit 16: P/ABV band

Price (`) 800 2.00x 2.75x 3.50x 4.25x 5.00x

600

400

200

Dec-10

Apr-06

Mar-09

Aug-08

Nov-06

Oct-09

Jul-11
Jan-11 Jul-10

Source: Company, Angel Research

Exhibit 17: P/E band

Price (`) 900 750 600 450 300 150 0 15x 20x 25x 30x

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

May-10

Jan-10

Jul-05

Jul-06

Jul-07

Jul-08

Jul-09

Source: Company, Angel Research

Exhibit 18: HDFC Bank Premium/Discount to the Sensex (%)

Premium/Discount to Sensex 70 60 50 40 30 20 10 0 (10) (20) (30)
Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Sep-11

Avg. Historical Premium

Source: Bloomberg, Angel Research

October 19, 2011

Jul-11

Feb-12

Jun-07

Jan-08

HDFC Bank | 2QFY2012 Result Update

Exhibit 19: Recommendation summary

Company
AxisBk FedBk HDFCBk ICICIBk* SIB YesBk AllBk AndhBk BOB BOI BOM CanBk CentBk CorpBk DenaBk IDBI# IndBk IOB J&KBk OBC PNB SBI* SynBk UcoBk UnionBk UtdBk VijBk

Reco.
Buy Accumulate Accumulate Buy Neutral Accumulate Accumulate Neutral Buy Accumulate Buy Neutral Neutral Buy Accumulate Neutral Accumulate Accumulate Neutral Accumulate Buy Buy Buy Neutral Accumulate Buy Neutral

CMP (`)
1,131 390 491 905 24 290 152 122 750 342 47 454 103 415 76 107 209 99 828 306 980 1,919 104 68 249 72 55

Tgt. price (`)

1,426 422 519 1,146 321 174 943 371 57 489 81 220 104 325 1,129 2,335 125 286 91 -

Upside (%)
26.0 8.0 5.7 26.6 10.6 14.3 25.8 8.5 22.3 17.9 6.5 5.0 5.3 6.4 15.1 21.7 20.4 14.8 25.5 -

FY2013E P/ABV (x)

1.8 1.1 3.3 1.7 1.2 1.9 0.7 0.8 1.0 0.9 0.6 0.9 0.7 0.7 0.6 0.7 0.9 0.6 0.9 0.7 1.1 1.5 0.7 0.8 0.9 0.6 0.7

FY2013E Tgt P/ABV (x)

2.3 1.2 3.5 2.1 2.1 0.8 1.3 1.0 0.8 0.8 0.6 0.9 0.7 0.8 1.3 1.8 0.9 1.1 0.8 -

FY2013E P/E (x)

9.5 8.1 17.1 13.1 6.8 9.8 4.3 5.5 5.7 5.7 4.4 5.3 5.1 4.2 3.7 5.1 5.4 4.0 5.7 5.3 6.1 7.4 4.8 4.1 5.2 4.4 6.7

FY2011-13E EPS CAGR (%)

20.4 18.3 30.5 24.1 15.6 18.9 8.9 (0.9) 10.6 15.2 31.8 (2.8) (14.6) 2.3 5.8 11.3 0.2 20.3 6.7 5.4 7.2 41.4 9.1 14.0 9.6 11.7 (3.2)

FY2013E RoA (%)

1.5 1.2 1.7 1.4 1.0 1.2 0.9 0.9 1.1 0.7 0.6 0.9 0.5 0.8 0.8 0.7 1.1 0.6 1.2 0.8 1.0 1.0 0.6 0.6 0.8 0.6 0.4

FY2013E RoE (%)

20.8 13.8 20.9 15.6 18.2 20.6 17.7 15.8 19.6 17.1 15.1 17.1 14.2 16.8 16.2 13.9 17.4 15.9 16.4 13.9 20.0 21.9 15.7 16.5 18.1 13.8 10.5

Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF

October 19, 2011

10

HDFC Bank | 2QFY2012 Result Update

Income statement
Y/E March (` cr) Net Interest Income - YoY Growth (%) Other Income - YoY Growth (%) Operating Income - YoY Growth (%) Operating Expenses - YoY Growth (%) Pre - Provision Profit - YoY Growth (%) Prov. & Cont. - YoY Growth (%) Profit Before Tax - YoY Growth (%) Prov. for Taxation - as a % of PBT PAT - YoY Growth (%) FY07 45.7 24.4 38.8 43.2 35.3 42.4 30.7 497 30.3 31.1 FY08 40.9 46.0 42.4 54.7 31.7 21.2 39.2 691 30.3 39.3 FY09 7,421 42.0 3,471 57.4 46.5 5,685 51.8 5,207 41.2 1,908 35.6 3,299 44.6 1,054 32.0 2,245 41.2 FY10 8,386 13.0 3,983 14.8 12,370 13.6 5,940 4.5 6,430 23.5 2,141 12.2 4,289 30.0 1,340 31.3 2,949 31.3 FY11 10,543 25.7 4,335 8.8 14,878 20.3 7,153 20.4 7,725 20.2 1,907 (10.9) 5,819 35.7 1,892 32.5 3,926 33.2 FY12E 12,240 16.1 5,152 18.8 17,392 16.9 8,362 16.9 9,030 16.9 1,426 (25.2) 7,604 30.7 2,473 32.5 5,131 30.7 FY13E 15,142 23.7 6,552 27.2 21,694 24.7 10,352 23.8 11,342 25.6 1,439 0.9 9,903 30.2 3,220 32.5 6,682 30.2 3,710 5,228 1,510 2,205

5,220 7,433 10,892 2,421 3,746 2,799 3,688 1,160 1,407 1,639 2,281

1,141 1,590

Balance sheet
Y/E March (` cr) Share Capital Reserves & Surplus Deposits - Growth (%) Borrowings Tier 2 Capital Total Liabilities Cash Balances Bank Balances Investments Advances - Growth (%) Fixed Assets Other Assets Total Assets - Growth (%) FY07 319 6,114 22.4 2,815 3,283 FY08 354 11,143 47.5 4,595 3,449 12,867 12,553 2,225 49,394 63,427 35.1 1,175 4,403 46.0 FY09 425 14,627 41.7 2,686 6,478 16,243 13,527 3,979 58,818 55.9 1,707 6,357 37.6 FY10 458 21,065 17.2 7,012 5,904 20,616 15,483 14,459 58,608 27.3 2,123 5,955 21.4 FY11 465 24,914 24.6 7,447 6,947 28,993 25,101 4,568 70,929 27.1 2,171 14,601 24.7 FY12E 465 28,855 26.0 10,346 7,989 34,403 19,711 8,622 FY13E 465 34,024 28.0 13,114 9,427 43,704 25,231 10,929

68,298 100,769 142,812 167,404 208,586 262,819 336,408

Other Liab. & Prov. 10,407 5,182 3,971 30,565 46,945 33.9 967 3,605 24.1

91,236 133,177 183,271 222,459 277,353 344,879 437,142

92,344 114,407 25.0 2,618 21,605 24.3 28.0 3,219 27,385 26.8

98,883 125,831 159,983 199,978 255,972

91,236 133,177 183,271 222,459 277,353 344,879 437,142

October 19, 2011

11

HDFC Bank | 2QFY2012 Result Update

Ratio analysis
Y/E March Profitability ratios (%) NIMs Cost to Income Ratio RoA RoE B/S ratios (%) CASA Ratio Credit/Deposit Ratio CAR - Tier I Asset Quality (%) Gross NPAs Net NPAs Slippages Loan Loss Prov. /Avg. Assets Provision Coverage Per Share Data (`) EPS ABVPS (75% cover.) DPS Valuation Ratios PER (x) P/ABVPS (x) Dividend Yield DuPont Analysis NII (-) Prov. Exp. Adj. NII Treasury Int. Sens. Inc. Other Inc. Op. Inc. Opex PBT Taxes RoA Leverage RoE 4.5 1.4 3.1 (0.1) 3.0 1.9 4.9 2.9 2.0 0.6 1.4 14.0 19.5 4.7 1.3 3.4 0.1 3.6 1.8 5.4 3.3 2.0 0.6 1.4 12.5 17.7 4.7 1.2 3.5 0.3 3.7 1.9 5.7 3.6 2.1 0.7 1.4 11.9 16.9 4.1 1.1 3.1 0.2 3.3 1.8 5.0 2.9 2.1 0.7 1.5 11.1 16.1 4.2 0.8 3.5 (0.0) 3.4 1.8 5.2 2.9 2.3 0.8 1.6 10.7 16.7 3.9 0.5 3.5 (0.0) 3.5 1.7 5.1 2.7 2.4 0.8 1.6 11.4 18.8 3.9 0.4 3.5 0.0 3.5 1.7 5.2 2.6 2.5 0.8 1.7 12.3 20.9 68.7 12.3 0.3 54.7 7.6 0.3 46.5 7.0 0.3 38.1 5.2 0.5 29.1 4.5 0.7 22.3 3.9 0.9 17.1 3.3 1.1 7.1 40.0 1.4 9.0 64.5 1.7 10.6 70.2 1.7 12.9 2.4 16.9 3.3 22.1 4.4 28.7 5.6 94.0 109.1 126.0 148.3 1.4 0.4 2.2 0.8 69.2 1.4 0.5 2.5 0.9 67.1 2.0 0.6 5.3 1.0 68.4 1.4 0.3 2.6 1.0 78.4 1.0 0.2 1.1 0.3 82.5 0.9 0.2 1.0 0.3 78.3 0.7 0.1 1.0 0.3 79.9 57.7 68.7 13.1 8.6 54.5 62.9 13.6 10.3 44.4 69.2 13.8 9.3 52.0 75.2 15.7 12.0 52.7 76.7 14.6 11.0 51.7 76.1 13.0 9.9 50.0 76.1 12.2 9.3 4.7 46.4 1.4 19.5 4.9 50.4 1.4 17.7 4.9 52.2 1.4 16.9 4.3 48.0 1.5 16.1 4.4 48.1 1.6 16.7 4.2 48.1 1.6 18.8 4.2 47.7 1.7 20.9 FY07 FY08 FY09 FY10 FY11 FY12E FY13E

October 19, 2011

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HDFC Bank | 2QFY2012 Result Update

Research Team Tel: 022 - 39357800

E-mail: [email protected]

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

HDFC Bank No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

October 19, 2011

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