HDFC BANK 2022-23 Annual Report Analysis

Fri, 21 Jul

HDFC BANK has announced its results for the year ended March 2023. Let us have a look at the detailed performance review of the bank during the year 2022-23.

HDFC BANK Income Statement Analysis

• Interest income during the year rose 25.6% on a year-on-year (YoY) basis.
• Interest expenses were up by 32.8% YoY during the same period.
• Operating expenses increased by 27.8% YoY during the year.
• The bank's net interest income (NII) increased by 20.2% YoY during the fiscal. Consequently, net interest margins (NIM) witnessed a growth and stood at 4.3% in FY23 as against 4.1% in FY22.
• Other income increased by 6.8% YoY during the year.
• Net profit for the year increased by 20.9% YoY.
• Net profit margins during the year declined to 26.9% in FY23 from 28.0% in FY22.

HDFC BANK Income Statement – 2022-23

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Interest Income	Rs m	1,359,364	1,707,541	25.6%
Other Income	Rs m	317,590	339,121	6.8%
Interest Expense	Rs m	585,843	777,799	32.8%
Net Interest Income	Rs m	773,521	929,741	20.2%
Operating Expense	Rs m	403,124	515,337	27.8%
Pre-provision Operating Profit	Rs m	687,986	753,525	9.5%
Provisions & Contingencies	Rs m	306,477	292,038	-4.7%
Profit before tax	Rs m	508,734	614,984	20.9%
Tax	Rs m	127,225	153,497	20.7%
Profit after tax	Rs m	380,528	459,971	20.9%
Minority Interest	Rs m	-982	-1,516	-54.4%
Net Interest Margin	%	4.1	4.3
Net profit margin	%	28.0	26.9

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HDFC BANK Balance Sheet Analysis

• The bank's deposits during FY23 stood at Rs 18,826.6 bn as compared to Rs 15,580.0 bn in FY22, thereby witnessing an increase of 20.8%.
• Advances for the year stood at Rs 16,619.5 bn as compared to Rs 14,209.4 bn during FY22, a rise of 17.0%.
• Cost of deposits for HDFC BANK rose 4.1% and stood at 3.3%, while yield on advances rose to 8.2%.
• The lender's investments rose to Rs 5,115.8 bn during the year from Rs 4,492.6 bn in FY22.
• Borrowing stood at Rs 2,565.5 bn, a growth of 13.0% as compared to previous year.
• Overall, the total assets and liabilities for FY23 stood at Rs 25,304.3 bn as against Rs 21,229.3 bn during FY22, thereby witnessing a rise of 19.2%.

HDFC BANK Balance Sheet – as on March 2023

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Networth	Rs m	2,469,857	2,883,203	16.7%
Advances	Rs m	14,209,423	16,619,493	17.0%
Deposits	Rs m	15,580,030	18,826,633	20.8%
Yield on advances	%	7.5	8.2
Cost of Deposits	%	3.1	3.3
Investments	Rs m	4,492,639	5,115,817	13.9%
Borrowings	Rs m	2,269,665	2,565,487	13.0%
Total Assets	Rs m	21,229,343	25,304,324	19.2%

Current Valuations for HDFC BANK

• The trailing twelve-month earnings per share (EPS) of the bank stands at Rs 82.4, an improvement from the EPS of Rs 68.6 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 1,675.7, stands at 18.2 times its trailing twelve months earnings.
• The price to adjusted book value (P/ABV) ratio at current price levels stands at 4.4 times, while the price to income ratio stands at 4.9 times.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Income per share (Unadj.)	Rs	245.1	306.0
Earnings per share (Unadj.)	Rs	68.6	82.4
Diluted earnings per share	Rs	50.5	61.0
Avg P/E ratio	Rs	22.0	18.2
Avg P/ABV ratio	Rs	4.2	4.4
Avg Market Cap	Rs	8,363,508	8,351,759
Dividends per share (Unadj.)	Rs	15.50	19.00

Ratio Analysis for HDFC BANK

• Efficiency Ratios

  Credit/Deposit Ratio: The bank's credit/deposit ratio deteriorated and stood at 88.3x during FY23, from 91.2x during FY22. The credit/deposit ratio tells us how much money a bank has raised in the form of deposits and has deployed as loans.

  Debt to Equity Ratio: The bank's debt to equity ratio increased and stood at 7.42x during FY23, from 7.23x during FY22. The debt to equity ratio of a bank tells us how much debt a bank uses relative to its equity.

• Liquidity Ratios

  Capital Adequacy Ratio (CAR): HDFC BANK's capital adequacy ratio (CAR) was at 19.3% as on 31 March 2023 as compared to 18.9% a year ago. This ratio helps measure the financial strength of the bank or any finance company to meet their obligations using their assets and capital.

  A bank that has a good CAR has enough capital to absorb potential losses. Thus, it has less risk of becoming insolvent and losing depositor's money.

  Provision Coverage Ratio (PCR): Apart from CAR, you also need to take a look at the bank's PCR and LCR ratios. Provisioning coverage ratio (PCR) is the percentage of funds that a bank sets aside for covering losses due to bad debts.

  So a high PCR ratio means asset quality issues are under control and the bank is not vulnerable.

  Liquidity Coverage Ratio (LCR): The LCR is designed to ensure that banks hold a sufficient reserve of high-quality liquid assets to allow them to survive a period of significant liquidity stress lasting 30 calendar days.

• Profitability Ratios

  Return on Equity (ROE): The return on equity (ROE) ratio for the bank improved and stood at 16.0% during FY23, from 15.4% during FY22. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

  Return on Assets (ROA): The return on asset (ROA) ratio of the bank improved and stood at 1.82% during FY23, from 1.79% during FY22. The ROA measures how efficiently the company uses its assets to generate earnings.

  Return on Capital Employed (ROCE): The ROCE for the bank improved and stood at 15.24% during FY23, from 14.05% during FY22. The ROCE measures the ability of a bank to generate profits from its total capital (shareholder capital plus debt capital) employed in the bank.

• NPA Ratios

  Gross NPA Ratio: The gross NPA ratio is the ratio of a bank's gross NPAs to gross advances. HDFC BANK's gross NPA ratio stood at 1.1% as of 31 March 2023 compared to 1.2% in the same period a year ago.

  A high gross NPA ratio is a bad thing as it indicates how much of a bank's loans are in danger of not being repaid.

  Net NPA Ratio: In simple language, net NPAs are simply the total non-performing assets minus the provision left aside. It gives you the exact value of NPAs after the bank has made provisions.

  The net NPA ratio of HDFC BANK was 0.3% in financial year 2023. This compared with 0.3% a year ago.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Credit/Deposit Ratio	x	91.2	88.3
Debt to Equity Ratio	x	7.2	7.4
Loans / Deposits	x	0.1	0.1
Capital Adequacy Ratio	%	18.9	19.3
Return on Equity	%	15.4	16.0
Return on Assets	%	1.8	1.8
Return on Capital Employed	%	14.1	15.2
% of Gross NPAs	%	1.2	1.1
% of Net NPAs	%	0.3	0.3
Yield on Advances	x	7.5	8.2
Yield on Investments	x	5.9	6.0

To see how HDFC BANK has performed over the last 5 years, please visit here.

HDFC BANK Share Price Performance

Over the last one year, HDFC BANK share price has moved up from Rs 1,361.0 to Rs 1,675.7, registering a gain of Rs 314.7 or around 23.1%.

Meanwhile, the S&P BSE BANKEX is trading at 52,122.8 (down 0.2%). Over the last one year it has moved up from 41,784.4 to 52,122.8, registering a gain of 10,338.4 points (up 24.7%).

Overall, the S&P BSE SENSEX is up 20.4% over the year.

(To know more, you can check out historical annual results for HDFC BANK here and quarterly results for HDFC BANK here)

Read: Latest Annual Report Analysis of HDFC BANK