Specialist in Indian Banking and Economic Research

Hemindra Hazari

Is a Securities & Exchange Board of India (SEBI) registered research analyst with over 25 years experience in the Indian capital markets with a specialization in banking and economy research and has managerial experience of establishing profitable equities business, leading and mentoring analysts.  He has worked with prominent foreign and domestic capital market firms such as UBS, Societe Generale, HSBC, ASK Raymond James  and Karvy Stock  Broking and is a regular guest on business media channels and is respected for his non-consensus view on stocks and the market.

Time to Junk the Less Savoury Parts of the Legacy of HDFC Bank’s Iconic CEO

HDFC Bank’s Digital Irresponsibility: RBI’s Novel Penalty Hits Where It Hurts

Selective Disclosure of Sensitive Information? HDFC Bank’s Conference Call on Its Digital Outages

US Firms’ Class Action Suits: HDFC Bank’s Auto Loan Malpractices Have Hit the Fan

HDFC Bank Q2FY21 Results – Robust Q2 Performance Seems to Defy All the Prevailing Economic Woes!

Equity Bottom-Up

<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>  1HFY2021 results is a study in contrasts to its non-bank finance company (NBFC) subsidiary, HDB Financial Services (HDB). While the standalone bank reported a 19% yoy growth in net profits, HDB’s  profits collapsed by an alarming 94% yoy (HDB reports only half-yearly performance). The dichotomy in performance lucidly highlights the concentration of stress in both entities, with HDB customers apparently being far worse off than HDFC Bank standalone. It appears the Covid-19 lockdown has taken a heavier toll on the higher-risk portfolio of HDB, especially on its Loan against Property (LAP) and commercial vehicle loans. It is now clear why HDB in a non-transparent and inhumane manner decided to <a href="https://hemindrahazari.com/2020/05/18/hdfc-banks-downsizing-programme-disturbing-lack-of-humanity-and-transparency/" target="_blank" rel="noopener">remove staff</a>  in April 2020, as the management were aware of the problem at an early stage. Pertinently, while HDB’s staff costs in 1HFY2021 declined 4% yoy, the bank’s standalone staff costs rose 10.6% yoy. On the results <a href="https://www.youtube.com/watch?v=-1QghaLEdsI" target="_blank" rel="noopener">conference call</a> while outgoing CEO, Aditya Puri reassured investors that the bank had not removed staff, and had even given increments and bonuses, it appears the HDB staff were treated differently in this period. It is also unfortunate that in its results call held on October 17, none of the senior business heads at HDFC Bank, who spoke at length reassuring investors that all was well on their respective fronts, chose to mention the disastrous performance at HDB, which appears to have borne the full brunt of the Covid-19 lockdown (one analyst, though, did query the bank on HDB’s poor performance). Indeed the management commentary on the call was in direct contradiction to HDB’s financial performance. HDB's valuation (prior to 1HFY2021 results) has estimated to have declined by around 25% from 3 months ago, to nearly US$ 9 bn. After the results, the valuation should further reduce. HDB’s results is an early indicator of the performance of the NBFC sector during the lockdown and investors must exercise caution. Even though HDB’s loans are only around 5% of HDFC Bank’s consolidated loans, it is a relevant subsidiary in terms of valuation, and one hopes that in future under the leadership of Sashi Jagdisan, transparency and corporate governance improve in the bank.

HDFC Bank (HDFCB IN)  1HFY2021 results is a study in contrasts to its non-bank finance company (NBFC) subsidiary, HDB Financial Services (HDB). While the standalone bank reported a 19% yoy growth in net profits, HDB’s  profits collapsed by an alarming 94% yoy (HDB reports only half-yearly performance). The dichotomy in performance lucidly highlights the concentration of stress in both entities, with HDB customers apparently being far worse off than HDFC Bank standalone. It appears the Covid-19 lockdown has taken a heavier toll on the higher-risk portfolio of HDB, especially on its Loan against Property (LAP) and commercial vehicle loans. It is now clear why HDB in a non-transparent and inhumane manner decided to remove staff  in April 2020, as the management were aware of the problem at an early stage. Pertinently, while HDB’s staff costs in 1HFY2021 declined 4% yoy, the bank’s standalone staff costs rose 10.6% yoy. On the results conference call while outgoing CEO, Aditya Puri reassured investors that the bank had not removed staff, and had even given increments and bonuses, it appears the HDB staff were treated differently in this period. It is also unfortunate that in its results call held on October 17, none of the senior business heads at HDFC Bank, who spoke at length reassuring investors that all was well on their respective fronts, chose to mention the disastrous performance at HDB, which appears to have borne the full brunt of the Covid-19 lockdown (one analyst, though, did query the bank on HDB’s poor performance). Indeed the management commentary on the call was in direct contradiction to HDB’s financial performance. HDB's valuation (prior to 1HFY2021 results) has estimated to have declined by around 25% from 3 months ago, to nearly US$ 9 bn. After the results, the valuation should further reduce. HDB’s results is an early indicator of the performance of the NBFC sector during the lockdown and investors must exercise caution. Even though HDB’s loans are only around 5% of HDFC Bank’s consolidated loans, it is a relevant subsidiary in terms of valuation, and one hopes that in future under the leadership of Sashi Jagdisan, transparency and corporate governance improve in the bank.  

HDB’s Profit Collapse: Canary in the Coalmine for the NBFC Sector in the Lockdown?