HDFC Bank Investor presentation: June 2013

Investor Presentation

June 2013

Well positioned across GDP spectrum

Meeting Diverse Customers’ Needs

Unique Franchise in the Indian Banking Sector

Key Business Initiatives

Financial Highlights

Value Proposition

1

Contents


Private Consumption

• Equally well positioned in urban and rural markets

• Leading player across retail loan categories

• Focus on working capital finance and trade services

Government

• Large tax collector for the Government of India

• Significant provider of cash management services for public

sector and semi government undertakings

Investment

• Term Loans for capex and brown field expansion

• Debt syndication team in place

• Project financing to strong and established players

• Leading working capital banker to capital goods

manufacturers

India GDP*

2

*Source CSO – GDP at Market Prices at current prices

FY – Fiscal year ended March 31

` - Rupees

`. Tn

Investment

Government

Private consumption

0

10

20

30

40

50

60

70

80

90

100

FY 2011 FY 2012 FY 2013






Value Proposition

3

Contents

Wide Range of Products and Customer Segments

Loan Products:

Auto Loans

Personal Loans

Home Loans / Mortgages

Commercial Vehicles Finance

Retail Business Banking

Credit Cards

Loans against Gold

2-Wheeler Loans

Construction Equipment Finance

Loans against Securities

Agri and Tractor loans

Education Loans

Other Products / Services:

Depository Accounts

Mutual Fund Sales

Private Banking

Insurance Sales (Life, General)

NRI Services

Bill Payment Services

POS Terminals

Debit Cards

Gold Sales

Foreign Exchange Services

Broking (HDFC Securities Ltd)

Deposit Products:

Savings Accounts

Current Accounts

Fixed / Recurring Deposits

Corporate Salary Accounts

Loan products contd…

Self Help Group Loans

Joint Liability Group Loans

Kisan Gold Card

Commercial Banking:

Working Capital

Term Loans

Bill Collection

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

Key Segments:

Large Corporate

Emerging Corporates

Financial Institutions

Government / PSUs

Supply Chain (Suppliers and Dealers)

Agriculture

Commodities

Products / Segments:

Foreign Exchange

Debt Securities

Derivatives

Equities

Other Functions:

Asset Liability Management

Statutory Reserve Management

Complete Suite of Products to Meet Diverse Customers’ Needs

Treasury

Wholesale

Banking

Retail

Banking

4

Investment Banking:

Debt Capital Markets

Equity Capital Markets

Project Finance

M&A and Advisory

Total Deposits

Gross Advances

Profit Before Tax

5

Indian GAAP figures. Fiscal Year ended 31st March; ` - Rupees

Gross advances and Profit Before Taxes classified as per RBI guidelines for segmental reporting (Basel II).

“Other Banking Operations Segment” (which includes Credit Cards, Third Party Product sales etc.) has been added to the Retail Segment

Business Mix

• Customer segments - main drivers of net revenues

• Well balanced loan mix between wholesale and retail segments

• Higher retail revenues partly offset by higher operating and credit costs

• Equally well positioned to grow both segments

`. Bn

`. Bn

`. Bn

0

1,600

3,200

2011 2012 2013

Retail Wholesale

0

1,300

2,600

2011 2012 2013

Retail Wholesale

0

60

120

2011 2012 2013

Retail Wholesale






Value Proposition

6

Contents

7

Strong National Network

All branches linked online, real time

Bank added 193 ‘micro’ branches in FY 2013

Customer base of over 28 million, net

addition of over 2 million customers in FY 2013

Branch classification

Mar ‘10 Mar ‘11 Mar ‘12 Mar ‘13

Branches 1,725 1,986 2,544 3,062

ATMs 4,232 5,471 8,913 10,743

Cities / Towns 779 996 1,399 1,845

Metro 35%

Urban 31%

Semi Urban 26%

Rural 8%

Mar ‘10

Metro 24%

Urban 24%

Semi Urban 36%

Rural 17%

Mar '13

FY – Fiscal year ended March 31

-

1,600

3,200

2011 2012 2013

Time Savings Current

Total Deposits

Core CASA Ratio

Average Saving Balance per Account

• Healthy proportion of CASA (current & savings) deposits

• Floats from multiple transactional banking franchises

• Continued growth in new customer acquisitions

• Provides customer base for ongoing cross-sell through branches

• Quality growth rather than mere numbers

`. Bn

Indian GAAP figures. Fiscal year ended 31st March

Core CASA ratio based on daily average balances for the year

` - Rupees

8

`.

High Quality Deposit Franchise

0%

26%

52%

2011 2012 2013

Savings Current

0

25,000

50,000

2011 2012 2013

• Amongst the lowest deposit costs in the industry

• Healthy margins – relatively stable over rising & declining interest rates

• Average yields supported by higher proportion & product mix of retail loans


9

Low Funding Costs – Healthy Margins

4.44% 4.43% 4.47%

0.00%

3.00%

6.00%

2011 2012 2013

Net Interest Margin

4.30%

5.72% 6.13%

0.00%

3.50%

7.00%

2011 2012 2013

Cost of Deposits

Indian GAAP figures. Fiscal year ended 31st March; FY - Fiscal Year ended 31st March.

* Recoveries includes miscellaneous income

` - Rupees

10

Strong Non-Funded Revenues

Multiple sources of fees &

commissions:

Banking charges (Retail & Wholesale)

Retail Asset Fees

Credit card Fees

Third party product sales

Cash management

Trade Finance

Depositary charges

Bullion sales

Custody

`. Mn

-2,000

38,000

78,000

2011 2012 2013

Fees & Commission

Fx & Derivatives Recoveries* P/L on Investments

• Other Income (non-funded revenues) at 30% of Net Revenues in FY 2013

• Composition of Other Income in FY 2013:

• Fees and commission 75%,

• FX and Derivatives Revenues 15%,

• Recoveries from written-off accounts 8%,

• Profit / Loss on sale of Investments 2%

The charts above cover only transactions initiated by our own customers at our channels and which could have been transacted at the Bank‟s branches.

Transactions such as (a) SMS alerts sent to customers, (b) point of sale (POS) transactions, and (c) transactions by holders of other

banks‟ cardholders have therefore been excluded.

% Customer Initiated Transactions by Channel

2001

Multiple Delivery Channels Greater Choice and Convenience for Our Retail

Customers

Regionalized Processing Units Derive Economies of Scale

Electronic Straight Through Processing Reduce Transaction Costs and Error Rates

Data Warehousing, CRM, Analytics Improve Sales & Credit Efficiencies, Cross-sell

Innovative Technology Application Provide New or Superior Products

2013

11

Leveraging Technology

Branches

43%

Phone Banking

14%

Internet & Mobile

3%

ATM

40%

ATM

30%

Branches

18%

Internet & Mobile

44%

Phone Banking

8%

NPA% to Advances Loan Loss Provisions

`. Bn

• Amongst the best portfolio quality (wholesale & retail) in the industry

• Strong credit culture, policies, processes

• Specific provision cover (excluding write-offs, technical or otherwise) at 80% of NPAs

• Restructured loans formed 0.2% of the Bank's gross advances as on March 31, 2013

• Floating provisions at `1,835 crore as on March 31, 2013

Indian GAAP figures. Fiscal year ended 31st March.

Net Non Performing Assets (NPA) = Gross NPA less specific loan loss provisions

` - Rupees

12

Healthy Asset Quality

- 0

14

28

2011 2012 2013

Gross NPAs Specific Provision General Provision

1.05% 1.02% 0.97%

0.19% 0.18% 0.20%

0%

1%

2%

2011 2012 2013

Gross NPA % Net NPA %

Net Profit

ROA

`. Mn

EPS


* 10 year Compounded Annual Growth Rate

EPS for the year 2011 has been recomputed to give effect of the share split from face value of ` 10 to face value of ` 2

1 13

Consistent Financial Performance

`.

-

35,000

70,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

1.58% 1.77%

1.90%

0%

1%

2%

2011 2012 2013

17.0

22.1

28.5

0

15

30

2011 2012 2013






Value Proposition

14

Contents

• Well diversified product mix

• Balancing volumes and market

share with margins and risk

• Home Loans* (Mortgage) offering

– origination (loan sanctions) now

around ` 10 Bn per month

• Loan losses within product pricing

parameters

`. Bn

Retail loans are net of loans sold and include loan assignments. Retail loans are classified as per RBI guidelines for segmental reporting (Basel II).

* In arrangement with HDFC Ltd., „Others‟ includes Tractor Loans, Loans to Self Help Group, Retail overdrafts, Loans against Securities, etc

Indian GAAP figures. Fiscal year ended 31st March; ` - Rupees

1 15

Retail Loans – Profitable Growth

Auto Loans

Business Banking

Commercial Vehicles

Personal Loans

Home Loans

Credit Card

Others

Kisan Gold Card

Gold Loans

0

700

1,400

2011 2012 2013

Two wheelers

`. Bn

Wholesale Advances

Indian GAAP figures. Fiscal year ended 31st March; Total wholesale advances are as per the RBI guidelines for segmental reporting (Basel II).

„Others‟ includes Capital markets and commodity finance, and other consumer loans over ` 50 million.

FIG – Financial Institutions and Government group, CV/CE – Large ticket commercial vehicle and construction equipment loan ` - Rupees

1 16

Wholesale Banking - Accessing Multiple Segments

• Leveraging relationships with large & emerging

corporates for multiple revenue streams

• Focus on house banking

• Balanced mix between working capital financing,

term loans and transactional banking

• Well diversified loan portfolio across major

industry segments

• Investment banking capability built across various

industry segments

0

600

1,200

2011 2012 2013

FIG

CV / CE

Others

Business Banking

Emerging Corporate

Corporate

• Leading provider of electronic banking services for supply chain management (SCM)

• Structured cash management-cum-vendor/distributor finance

Corporate

Dealers

Distributors

OEM Customers

Vendors

0

850

1,700

2011 2012 2013

Primary Settlements Accounts (Stock Exchanges)

0

14,000

28,000

2011 2012 2013

Gross Cash Management Volumes * Nos.

• Clear market leader : cash settlements on stock & commodities exchanges

• Leading provider of cash management solutions

• Large corporates and SME

• Financial Institutions

• Government (including tax collections)

For the Fiscal year ended 31st March,

* Gross Cash Management Volumes adjusted for collections on account of IPOs

` - Rupees

`. Bn

1 17

Focus on Transactional Banking Opportunities

0

6,000

12,000

2011 2012 2013

FX & Derivatives Revenues

• Revenues – Largely customer driven, low reliance on trading revenue

• Treasury advisory services

• Plain vanilla FX offerings to retail and business banking segments

• FX and derivatives product sales to corporate and institutional customers

Indian GAAP figures. Fiscal year ended 31st March; ` - Rupees

Corp – Corporate, ECG – Emerging Corporate Group, BB – Business Banking, FIG – Financial Institutions & Government Group;

„Others‟ includes Capital Markets and Commodity Finance

`. Mn

1 18

Customer Focused Treasury Products

Corp 17%

ECG 10%

Retail 55%

BB 6%

FIG 3%

Others 9%

Customer Revenues Mix

0

60

120

2011 2012 2013

• Market leader in credit cards

• Around 75% of new credit cards issued to internal customers

• Loss rates well within the range priced in

• Merchant acquiring – over 240,000 POS terminals, 53% growth in thru-puts in FY 2013

Number of Cards Credit Cards Receivables Acquiring Thruputs

Indian GAAP figures. Fiscal year ended 31st March. ` - Rupees

FY 2013 – Fiscal year ended 31st March 2013

POS – Point of Sale

`.Bn `.Bn Mn

1 19

Cards – Achieving Scale

0

12

24

2011 2012 2013

Debit cards Credit cards

0

400

800

2011 2012 2013

20

Banking on Rural India

Local Government

Self Help Groups

Farmers Intermediaries

(Arhatiyas, traders)

Food Processors

Individuals

Pre and Post Harvest Credit

Tractor Loans

Kisan Cards

Small Working Capital Loan

Regular / Basic Savings Bank Deposit Account

Term / Micro deposits

Life and General Insurance

Payment ecosystem

Banking Services for the rural eco-system

through customised loan and deposit

products whilst maintaining credit standards

Other banking products

Liability Products

Sustainable Livelihood Banking

Loan Products

Rural banking products offered through

traditional and micro branches in the deeper

geography of the country

Micro branches are primarily two member branches to expand and deepen the penetration in the rural market including in unbanked area.

HDB Financial Services Limited

• NBFC catering to certain customer segments not served by the Bank

• Main Products: Retail secured and unsecured loans, Insurance services and Collection

services

• Network of 230 branches

• FY 2013 - Loan book : ` 82,037 million, Net Profit : ` 1,024 million

HDFC Securities Limited

• Amongst the leading equity brokerages in the country

• Over 190 branches and 1.6 million customers

• Revenues from brokerage as well as distribution of financial products

• FY 2013 - Net Profit : ` 668 million

21

Subsidiary Companies

` - Rupees

FY 2013 – Fiscal year ended March 31, 2013






Value Proposition

22

Contents

Indian GAAP figures (` Mn) , ` - Rupees;

*Recoveries includes miscellaneous income

23

Key Financials

`. In million

Quarter

Ended

June 2013

Quarter

Ended

June 2012

Change

Year

Ended

Mar 13

Year

Ended

Mar 12

Change

Net Interest Income 44,187 36,524 21.0% 158,111 128,846 22.7%

Fees & Commissions 12,845 11,505 11.6% 51,669 43,121 19.8%

FX & Derivatives 3,143 3,148 -0.2% 10,101 11,388 -11.3%

Profit / (loss) on Investments 1,995 665 199.9% 1,613 (1,959) -182.3%

Recoveries* 1,273 1,176 8.2% 5,143 5,286 -2.7%

Net Revenues 63,443 53,018 19.7% 226,637 186,682 21.4%

Operating Costs 30,382 26,266 15.7% 112,361 92,776 21.1%

Provisions & Contingencies 5,271 5,816 -9.4% 16,770 18,774 -10.7%

Profit Before Tax 27,790 20,936 32.7% 97,506 75,132 29.8%

Tax 9,351 6,762 38.3% 30,243 23,461 28.9%

Profit After Tax 18,439 14,174 30.1% 67,263 51,671 30.2%

• Net profit up by 30.1% to ` 18.4 Bn

• Gross advances increased by 21.2% to ` 2,603 Bn

• Deposits up by 17.8% to ` 3,033 Bn

• CASA ratio at 44.7%

• Net Interest Margin at 4.6%

• Cost-to-income ratio at 47.9%

• Gross NPA / gross advances at 1.0%

• Net NPA / net advances at 0.3%

• Capital adequacy ratio (CAR) as per Basel III - total 15.5% of which tier I at 10.5%

24

Indian GAAP figures (Bn =Billion); ` - Rupees

Net NPA = Gross NPA less specific loan loss provisions, Capital adequacy ratio computed as per RBI‟s Basel III capital regulations

Comparisons are with respect to corresponding figures for the quarter ended June 30, 2012

Financial Highlights - Quarter ended June 2013






Value Proposition

25

Contents

26

Value Proposition – Healthy Growth, Low Risk

Healthy balance sheet and

revenue growth

Leveraging organic and

inorganic growth

opportunities

Proven ability to generate

Shareholder Value

Branch Sales Process,

Data Mining & CRM,

geared for Cross sell

Strong Risk management,

focus on asset quality

Disciplined margin and

capital management with a

focus on ROA/ROE

Nationwide network, with

expanding semi urban and

rural footprint

Growing economy /

banking industry,

Gaining market share

Leading (Top 3) player

across multiple products

Wide Product range and

multiple customer segment

Certain statements are included in this release which contain words or phrases, such as “will”, “aim”, “believe”, “expect”, “will

continue”, “anticipate”, “estimate”, “intend”, “plan”, “future”, “objective”, “project”, “should”, and similar expressions or

variations of these expressions, that are “forward-looking statements”. Actual results may differ materially from those

suggested by the forward-looking statements due to certain risks or uncertainties associated with our expectations with

respect to, but not limited to, our ability to implement our strategy successfully, the market acceptance of and demand for

various banking services, future levels of our non-performing loans, our growth and expansion, the adequacy of our

allowance for credit and investment losses, technological changes, volatility in investment income, our ability to market new

products, cash flow projections, the outcome of any legal, tax or regulatory proceedings in India and in other jurisdictions we

are or become a party to, the future impact of new accounting standards, our ability to pay dividends, the impact of changes

in banking regulations and other regulatory changes in India and other jurisdictions on us, our ability to roll over our short-

term funding sources and our exposure to market and operational risks. By their nature, certain of the market risk

disclosures are only estimates and could be materially different from what may actually occur in the future. As a result,

actual future gains, losses or impact on net income could materially differ from those that have been estimated. Our forward

looking statements speak only as of the date on which they are made and we do not undertake any obligation, and we do

not intend, to update or revise any forward looking statements to reflect events or circumstances after the date in the

statement, even if our expectations or any related events or circumstances change. In addition, other factors that could

cause actual results to differ materially from those estimated by the forward-looking statements contained in this document

include, but are not limited to: general economic and political conditions, instability or uncertainty in India and other countries

which have an impact on our business activities or investments caused by any factor including the global financial crisis and

problems in the Eurozone countries, terrorist attacks in India, the United States or elsewhere, anti-terrorist or other attacks

by the United States, a United States-led coalition or any other country, tensions between India and Pakistan related to the

Kashmir region, military armament or social unrest in any part of India, the monetary and interest rate policies of the

government of India, natural calamities, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange

rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in Indian

and foreign laws and regulations, including tax, accounting and banking regulations, changes in competition and the pricing

environment in India, and regional or general changes in asset valuations.

Economy & Finance

HDFC Bank Investor presentation: June 2013