External broker reports(aggregated public sources), HDFC Securities

HDFC Securities

External broker reports(aggregated public sources)

Equity Bottom-Up

<p>LIC Housing Finance: LICHF disappointed, driven by elevated provisioning (1.1% of loans, annualised) and interest reversals (INR1.35bn). While asset quality improved across buckets, aggregate stressed pool (GS-II + GS-III + restructured) still remains elevated (12.6% vs. 13.6% in Jun'21), indicating that the path to normalisation is likely to be prolonged. The company shored up its GS-III provisions significantly to 43%, driving credit costs higher, although GS-II provisioning coverage continues to be subdued (0.2% PCR).</p>
<div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

LIC Housing Finance: LICHF disappointed, driven by elevated provisioning (1.1% of loans, annualised) and interest reversals (INR1.35bn). While asset quality improved across buckets, aggregate stressed pool (GS-II + GS-III + restructured) still remains elevated (12.6% vs. 13.6% in Jun'21), indicating that the path to normalisation is likely to be prolonged. The company shored up its GS-III provisions significantly to 43%, driving credit costs higher, although GS-II provisioning coverage continues to be subdued (0.2% PCR).
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

HSIE Results Daily: Mphasis, Container Corporation, LIC Housing Finance and More

External broker reports(aggregated public sources), Axis Direct

Axis Direct

<p>We maintain a BUY rating on the stock in the backdrop of attractive valuations and value it at 1.1x FY23E ABV to arrive at a target price of Rs 100.</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

We maintain a BUY rating on the stock in the backdrop of attractive valuations and value it at 1.1x FY23E ABV to arrive at a target price of Rs 100.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Federal Bank: Business Performance Picks Up

<p>We maintain a BUY with a TP of Rs 100 (1.1x FY23E ABV).</p><p>FY21 was a year of consolidation for Federal Bank (FB) with the management focusing on its commitment to become the ‘first choice’ bank for all stakeholders and pursue initiatives to enhance its status from ‘Presence’ to ‘Prominence’ across India. While the bank’s balance sheet growth was calibrated,its asset quality was maintained inline with larger peers. New initiatives undertaken in the past have been gathering pace in the areas of neo-banking and higher-yielding product segments which will drive margin improvement and lead to better ROAs.</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

We maintain a BUY with a TP of Rs 100 (1.1x FY23E ABV).FY21 was a year of consolidation for Federal Bank (FB) with the management focusing on its commitment to become the ‘first choice’ bank for all stakeholders and pursue initiatives to enhance its status from ‘Presence’ to ‘Prominence’ across India. While the bank’s balance sheet growth was calibrated,its asset quality was maintained inline with larger peers. New initiatives undertaken in the past have been gathering pace in the areas of neo-banking and higher-yielding product segments which will drive margin improvement and lead to better ROAs.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Federal Bank: On Track from ‘Presence’ to ‘Prominence’

Specialist in Indian Banking and Economic Research

Hemindra Hazari

<p>A notable feature in <a href="https://www.smartkarma.com/entities/hdfc-bank-ltd-4b6b7a92-9087-468d-9dbe-ab169e77f014" target="_blank" data-smartkarma-citation="entities:558:1" rel="noopener">HDFC Bank (HDFCB IN)</a> and <a href="https://www.smartkarma.com/entities/kotak-mahindra-bank-ltd" target="_blank" data-smartkarma-citation="entities:126:1" rel="noopener">Kotak Mahindra Bank (KMB IN)</a> (KMB) is the historical absence of any commercial banking expertise amongst the independent directors on the boards. The founders ( <a href="https://www.smartkarma.com/entities/housing-development-finance" target="_blank" data-smartkarma-citation="entities:252:1" rel="noopener">HDFC Limited (HDFC IN) </a>and Uday Kotak) and the Nomination and Remuneration Committee in both banks, as a deliberate strategy, have tried to ensure that only non-independent directors have commercial banking expertise. This is unusual, as other private sector banks such as <a href="https://www.smartkarma.com/entities/icici-bank-ltd" target="_blank" data-smartkarma-citation="entities:547:1" rel="noopener">ICICI Bank Ltd (ICICIBC IN)</a>, <a href="https://www.smartkarma.com/entities/axis-bank-ltd" target="_blank" data-smartkarma-citation="entities:768:1" rel="noopener">Axis Bank Ltd (AXSB IN)</a>,  <a href="https://www.smartkarma.com/entities/indusind-bank-ltd" target="_blank" data-smartkarma-citation="entities:1558:1" rel="noopener">Indusind Bank (IIB IN)</a> and <a href="https://www.smartkarma.com/entities/federal-bank-ltd" target="_blank" data-smartkarma-citation="entities:11784:1" rel="noopener">Federal Bank (FB IN)</a> have former commercial bankers as independent directors on their boards.</p><p><strong>Banking, being a specialised and highly regulated sector with an economy-wide systemic impact, needs that some directors have commercial banking expertise separate and distinct from the executive.</strong><strong>The absence of such independent functional expertise on the board is a sign that the executive/controlling shareholders do not want to be challenged or to have close oversight in the banks’ core area of operations. </strong></p><p>HDFC Bank and KMB are poster banners for private sector banking in India, with a combined market capitalisation of US$ 159 bn. They have achieved this without the presence of former commercial bankers as independent directors. Both Aditya Puri (erstwhile HDFC Bank CEO) and Uday Kotak maintained an iron-clad grip on asset quality, which is visible in their track record of profitability and stock market valuation. However, banking should not be individual-based, but based on appropriate systems. A diversified board of directors, including those with commercial banking expertise independent of the executive, should be mandatory in all banks. Regardless of their track record and valuation, banks which deliberately exclude such critical functional expertise on their boards must be hauled up by the Reserve Bank of India, credit rating analysts and the capital markets. <strong>The fact that HDFC Bank and KMB have rewarded shareholders manifold without such independent expertise on their boards should not be an excuse for such an anomaly to continue, nor should it be replicated in other banks.</strong></p>

A notable feature in HDFC Bank (HDFCB IN) and Kotak Mahindra Bank (KMB IN) (KMB) is the historical absence of any commercial banking expertise amongst the independent directors on the boards. The founders ( HDFC Limited (HDFC IN) and Uday Kotak) and the Nomination and Remuneration Committee in both banks, as a deliberate strategy, have tried to ensure that only non-independent directors have commercial banking expertise. This is unusual, as other private sector banks such as ICICI Bank Ltd (ICICIBC IN), Axis Bank Ltd (AXSB IN),  Indusind Bank (IIB IN) and Federal Bank (FB IN) have former commercial bankers as independent directors on their boards.Banking, being a specialised and highly regulated sector with an economy-wide systemic impact, needs that some directors have commercial banking expertise separate and distinct from the executive.The absence of such independent functional expertise on the board is a sign that the executive/controlling shareholders do not want to be challenged or to have close oversight in the banks’ core area of operations. HDFC Bank and KMB are poster banners for private sector banking in India, with a combined market capitalisation of US$ 159 bn. They have achieved this without the presence of former commercial bankers as independent directors. Both Aditya Puri (erstwhile HDFC Bank CEO) and Uday Kotak maintained an iron-clad grip on asset quality, which is visible in their track record of profitability and stock market valuation. However, banking should not be individual-based, but based on appropriate systems. A diversified board of directors, including those with commercial banking expertise independent of the executive, should be mandatory in all banks. Regardless of their track record and valuation, banks which deliberately exclude such critical functional expertise on their boards must be hauled up by the Reserve Bank of India, credit rating analysts and the capital markets. The fact that HDFC Bank and KMB have rewarded shareholders manifold without such independent expertise on their boards should not be an excuse for such an anomaly to continue, nor should it be replicated in other banks.

HDFC Bank and KMB Carefully Select Independent Directors - For Their Lack of Banking Knowledge

<p>While restructuring was on the higher side at ~2%, the nature of the book is secured and mostly from HL which is manageable. We maintain BUY with a TP of Rs 100 (1.1x FY23E ABV).</p><div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>

While restructuring was on the higher side at ~2%, the nature of the book is secured and mostly from HL which is manageable. We maintain BUY with a TP of Rs 100 (1.1x FY23E ABV).Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Federal Bank: Managing Macro Challenges Well

India

Federal Bank Limited operates branches and regional offices throughout India. The Bank offers a wide range of financial services, including merchant banking, international banking and foreign exchange, leasing facilities, money markets and agricultural advances. The Bank also provides lending for hi-tech agricultural and government sponsored schemes.

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Federal Bank (FB IN)

HSIE Results Daily: Mphasis, Container Corporation, LIC Housing Finance and More

LIC Housing Finance: LICHF disappointed, driven by elevated provisioning (1.1% of loans, annualised) and interest reversals (INR1.35bn). While...

HDFC Securities

Federal Bank: Business Performance Picks Up

We maintain a BUY rating on the stock in the backdrop of attractive valuations and value it at 1.1x FY23E ABV to arrive at a target price of Rs 100.

Axis Direct

Federal Bank: On Track from ‘Presence’ to ‘Prominence’

We maintain a BUY with a TP of Rs 100 (1.1x FY23E ABV). FY21 was a year of consolidation for Federal Bank (FB) with the management focusing on its...

Axis Direct

HDFC Bank and KMB Carefully Select Independent Directors - For Their Lack of Banking Knowledge

The absence of independent commercial banking expertise on the board is a sign that the executive do not want to be challenged or to have close...

Hemindra Hazari

Federal Bank: Managing Macro Challenges Well

While restructuring was on the higher side at ~2%, the nature of the book is secured and mostly from HL which is manageable. We maintain BUY with a...

Axis Direct

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