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A little slow on this one, but Q2 looked good - again. We're still waiting to hear from the likes of ICICI, Yes, and SBI so comparisons will have to wait, but loan growth over 20% and keeping the NIM at 4.2% are pretty strong results.

I'm still a little leery of the reduced loan loss provisions, but management talked on the call about specific provisions (those made with specific loans or loan groups in mind) and specific reserves are 82% of gross non-performing assets. In addition there are general provisions made to address the general risk of a growing loan portfolio. According to management these reserves push total coverage to over 200%.

This is more reassuring though it is hard to track these numbers through the quarterly reported numbers so I am having to take management's word on this.

All in all, another good quarter with HDFC doing what we expect. I'm still watching loan quality, especially as retail lending increases (it was 53% of loans in Q2). The stabilizing of the rupee has helped, as well and the shares look to be near the low end of my estimate of fair value ($38-$41 - though this can change dramatically depending on FX).
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Snake (and Cogitarius), thanks for continuing to post on this board. Rest assured people are reading and appreciate your efforts.
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Thanks Nate!
Anurag
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Thanks Nate - good to see you around!

Any thoughts on the CASA ratio dropping back to the ~45% of the 2008 crisis?

Also, M* shows P/B of 3.9 - isn't that on the high side?
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MDP Home Fool
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Thanks Floorhead! Good to know I'm not always having a fascinating conversation with myself :)
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MDP Home Fool
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Cog

The drop in CASA is one thing to keep an eye on, but it doesn't appear to be having too much of an impact on net interest margin (NIM) as of yet, so I'm not too worried. If we see NIM dipping back towards 4.0% it will be more notable.

On the other hand, if HDB is relying more on short-term borrowing as a result of the drop in cheap CASA deposits then your concerns would be at least partially justified (it was the drying up of short-term markets that caused a lot of the pain during the financial crisis).

As for the P/B, yes, 3.9 is high, though not the highest we've seen for HDB and you're paying for quality here. HDB continues to put up 20%+ growth and maintains industry leading margins and asset quality.

As I said, I'm not sure I'd be buying right now, but if one were to pay up for quality somewhere, you'd find worse places I think.
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Nate,

You are awesome. Thank you for the recap of the quarter.

Vish
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As for the P/B, yes, 3.9 is high, though not the highest we've seen for HDB and you're paying for quality here. HDB continues to put up 20%+ growth and maintains industry leading margins and asset quality.

I am not a 100% sure on this but the trading range for HDB has traditionally been between 3 - 6 times P/B. So 3.9 seems on the lower end. I think FX is a big IF here. The 50% growth in dividend this year translated to 0% growth due to FX. I hope the rupee gains next year during the July time when HDB pays the dividend. The dividend growth over the last 13 - 15 years has been staggering and I do not think that will slow in the near future. Maybe 10 - 20 years from now.

Again, my biggest holding and I have been a shareholder since the 2000's.

Vish
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