Value investor- India mid & small caps

Bhaskar Chakraborty

Equity Bottom-Up

<ul><li>Induction of senior management from top private banks in the country driving a turnaround in business quality and growth</li><li>Senior management compensation has moved away from the IBA platform enabling talent accretion; compensation structure aligned to shareholders with meaningful ESOP grants</li><li>Loan growth accelerating with focus on retail (39% of loans) and higher rated corporate (38% of loans) under new management</li><li>Slippages and credit costs trending down, limited exposure to challenged sectors allows management to focus on growth</li><li>Adequately capitalized for growth with Tier1 @ 14.7%</li><li>We expect 25% earnings CAGR over FY17-19. ROE should improve from 9.8% in FY17 to 11.4% in FY19. Stock trades at an attractive 1.55x FY19 P/B. We have a target of Rs140 @ 2x FY19 P/B. BUY for 28% upside.</li></ul>

Induction of senior management from top private banks in the country driving a turnaround in business quality and growthSenior management compensation has moved away from the IBA platform enabling talent accretion; compensation structure aligned to shareholders with meaningful ESOP grantsLoan growth accelerating with focus on retail (39% of loans) and higher rated corporate (38% of loans) under new managementSlippages and credit costs trending down, limited exposure to challenged sectors allows management to focus on growthAdequately capitalized for growth with Tier1 @ 14.7%We expect 25% earnings CAGR over FY17-19. ROE should improve from 9.8% in FY17 to 11.4% in FY19. Stock trades at an attractive 1.55x FY19 P/B. We have a target of Rs140 @ 2x FY19 P/B. BUY for 28% upside.

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

India’s real GDP growth continues to trend lower. We are doubtful that this is news or that people are unfamiliar with the chart of its regression.  What may be more interesting in the first instance is putting the country’s benign loan growth in perspective, and secondly long-term credit metrics of one the most aggressive lenders into this sustained downturn: <a href="https://www.smartkarma.com/entities/558" target="_blank" data-smartkarma-citation="entities:558:1">HDFC Bank Limited (HDFCB IN)</a>.  Domestic credit growth is running at 8% in India as at August 2017, year on year. This is half the average…

India’s real GDP growth continues to trend lower. We are doubtful that this is news or that people are unfamiliar with the chart of its regression.  What may be more interesting in the first instance is putting the country’s benign loan growth in perspective, and secondly long-term credit metrics of one the most aggressive lenders into this sustained downturn: HDFC Bank Limited (HDFCB IN).  Domestic credit growth is running at 8% in India as at August 2017, year on year. This is half the average…

A Long-Term Perspective on HDFC Bank Is Worthwhile as India's Slowdown Continues

India has cut interest rates again. The successive multiple rate cuts suggest to us that all is not well in the India economy. There will be inflated risk for those banks that have been especially aggressive at lending. For the listed banks with data through June 2017, <a href="https://www.smartkarma.com/entities/558" target="_blank" data-smartkarma-citation="entities:558:1">HDFC Bank Limited (HDFCB IN)</a> shows by far the most aggressive growth in credit. The concern ultimately is about the seasoning of loans into a worsening economic environment. Maybe this is why the bank is already showing some of…

India has cut interest rates again. The successive multiple rate cuts suggest to us that all is not well in the India economy. There will be inflated risk for those banks that have been especially aggressive at lending. For the listed banks with data through June 2017, HDFC Bank Limited (HDFCB IN) shows by far the most aggressive growth in credit. The concern ultimately is about the seasoning of loans into a worsening economic environment. Maybe this is why the bank is already showing some of…

India's 7th Rate Cut, HDFC's Defiant Loan Growth

<a href="https://www.smartkarma.com/entities/558" target="_blank" data-smartkarma-citation="entities:558:1">HDFC Bank Limited (HDFCB IN)</a> appears to be taking on excessive credit to offset far worse credit metrics. It's bizarre, but it does happen. It reminds us of China about 10 years ago, when banks expanded loans at high rates, partly in order to push non-performing loan (NPL) ratios down.  The risk of doing this amidst a weakening overall economy is that it results in far higher NPLs and credit costs. This is what we are seeing with HDFC Bank, Asia’s darling bank.

HDFC Bank Limited (HDFCB IN) appears to be taking on excessive credit to offset far worse credit metrics. It's bizarre, but it does happen. It reminds us of China about 10 years ago, when banks expanded loans at high rates, partly in order to push non-performing loan (NPL) ratios down.  The risk of doing this amidst a weakening overall economy is that it results in far higher NPLs and credit costs. This is what we are seeing with HDFC Bank, Asia’s darling bank. 

Soaring Impairment Costs at HDFC Bank, More than Peers

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Equity Capital Markets

RBL Bank plans to raise between US$150-200m later this year by selling a mix of primary and secondary shares. In this insight, we have looked at the company's past financial performance, along with its return profile in order to benchmark it versus other listed players. RBL is similar to other listed old age private sector banks in terms of asset size and returns and the deal will probably need to come in at a discount to this group for it to do well.

RBL Bank plans to raise between US$150-200m later this year by selling a mix of primary and secondary shares. In this insight, we have looked at the company's past financial performance, along with its return profile in order to benchmark it versus other listed players. RBL is similar to other listed old age private sector banks in terms of asset size and returns and the deal will probably need to come in at a discount to this group for it to do well.

RBL Bank Pre-IPO Review - Impressive Asset Growth but Return Ratios Lagging

India

Federal Bank is a major Indian private sector commercial bank offering a comprehensive suite of banking and financial services, including retail banking, wholesale banking, and treasury operations. It provides products such as savings and current accounts, loans, credit and debit cards, insurance, and wealth management. The bank is headquartered in Aluva, Kochi, Kerala, India, and was founded on April 23, 1931.

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Federal Bank (FB IN)

Federal Bank: Will You Bank on This One?

Induction of senior management from top private banks in the country driving a turnaround in business quality and growth Senior management...

Bhaskar Chakraborty

A Long-Term Perspective on HDFC Bank Is Worthwhile as India's Slowdown Continues

India’s real GDP growth continues to trend lower. We are doubtful that this is news or that people are unfamiliar with the chart of its...

Daniel Tabbush

India's 7th Rate Cut, HDFC's Defiant Loan Growth

India has cut interest rates again. The successive multiple rate cuts suggest to us that all is not well in the India economy. There will be...

Daniel Tabbush

Soaring Impairment Costs at HDFC Bank, More than Peers

HDFC Bank Limited (HDFCB IN) appears to be taking on excessive credit to offset far worse credit metrics. It's bizarre, but it does happen. It...

Daniel Tabbush

RBL Bank Pre-IPO Review - Impressive Asset Growth but Return Ratios Lagging

RBL Bank plans to raise between US$150-200m later this year by selling a mix of primary and secondary shares. In this insight, we have looked at...

Sumeet Singh

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