“Fundamental Analysis of HDFC Bank: Unlocking Insights”

HDFC BANK- About the company

In today’s discussion, we are going to dive deeply into the fundamental analysis of HDFC Bank to analyze various prospects of this market leader. HDFC Bank is actively involved in delivering comprehensive banking and financial services, encompassing commercial banking and treasury operations. The institution extends its financial offerings to both upper and middle-income individuals as well as corporations across India.

The bank operates through distinct segments, namely Treasury, Retail Banking, Wholesale Banking, and Other Banking Operations. Through these segments, HDFC Bank caters to a diverse range of customer needs and fosters its presence in the Indian financial landscape. With a strong focus on innovation and technology, the bank has emerged as a leader in the digital banking space.

Macroeconomic Factors Affecting HDFC Bank

The performance of HDFC Bank is influenced by several macroeconomic indicators. Let’s explore some key factors:

GDP Growth and its Implications on the Banking Sector

Gross Domestic Product (GDP) growth is a crucial indicator that impacts the overall banking industry. HDFC Bank, as a major player, is directly influenced by the economic growth of the country. A robust GDP growth signifies increased business opportunities, higher loan demand, and a positive outlook for the bank.

As of the end of March 2001, the total outstanding loans of Indian banks stood at ₹5.1 trillion, or 23.9% of the country’s annual gross domestic product (GDP) at the time. By September 2022, the figure had grown to ₹130.4 trillion, or 50.3% of GDP.

Meanwhile, the total bank deposits have jumped from ₹9.6 trillion, or 45% of GDP, as of end-March 2001, to ₹175.4 trillion, or 67.6% of the GDP in September 2022.

Interest Rate Fluctuations and its Impact on Lending and Borrowing Rates

Interest rate fluctuations significantly impact HDFC Bank’s lending and borrowing rates. As the bank’s cost of funds is determined by prevailing interest rates, any changes can affect its profitability. A decline in interest rates may spur loan demand, while an increase can lead to reduced borrowing and economic slowdown.

Inflation and its Effect on Purchasing Power and Loan Repayment

Inflation, the rate at which prices of goods and services increase, affects the purchasing power of individuals and their ability to repay loans. HDFC Bank, with its vast customer base, needs to consider inflationary trends while analyzing credit risks and loan repayment capacity.

HDFC Bank Essentials- Fundamental And Financial Analysis

The Bank has been performing impressively with an operating revenue of Rs. 204,666.10 Cr. over the past 12 months. The company has achieved an outstanding annual revenue growth rate of 22%, reflecting its strong market position. Moreover, the bank maintains decent profitability ratios, with an ROCE of 6.85% and an ROE of 18.6%.

Shareholding pattern FY2023
Shareholding pattern FY2023

In terms of ownership, there have been slight changes in holdings. Promoters’ holdings decreased marginally from 25.60% to 25.59% in the March 2023 quarter. On the other hand, FII/FPI increased their holdings from 32.10% to 32.24%, while Mutual Funds also increased their holdings from 18.37% to 18.47% during the same period. Institutional Investors overall raised their holdings from 60.47% to 60.57% in the March 2023 quarter.

These factors collectively highlight the positive performance and growth potential of HDFC Bank, making it an attractive investment opportunity.

Evaluating HDFC Bank’s Financial Statements- Fundamental Analysis of HDFC Bank

Profit & Loss | Income Statements

For 10 years, HDFC Bank has demonstrated a remarkable and consistent growth trajectory. The revenue of the bank has shown a continuous and substantial increase. In March 2012, the revenue stood at around 28,000 crores, which has now soared multiple times to reach an impressive 170,754 crores in March 2023, marking a rise of approximately 21.34 times.

The net profit of HDFC Bank has also experienced significant growth during this period. In March 2012, the net profit was 5,277 crores, which has surged to 46,149 crores in March 2023. This represents an increase of approximately 8.74 times, demonstrating the bank’s consistent profitability.

Notably, the depreciation cost has been effectively managed and reduced to zero within 10 years, highlighting the bank’s efficient financial management.

fundamental analysis of hdfc bank: Income statements
Profit & Loss statements of HDFC Bank in last 10 years. Source: screener. in

In terms of Earnings Per Share, HDFC Bank has displayed a positive trend. EPS, which reflects the consistency in the company’s earnings, has risen from a mere 11 rupees in March 2012 to a significant 82 rupees in March 2023, a rise of nearly 8 times. This indicates the bank’s ability to generate consistent and substantial earnings over time.

Furthermore, the dividend payout of HDFC Bank has been consistently increasing, as evident from the provided data. This indicates the bank’s commitment to distributing profits to its shareholders, further enhancing the attractiveness of investment in the company.

Overall, HDFC Bank’s financial performance showcases its growth potential, solid profitability, and consistent dividend payouts, making it a promising institution in the banking sector.

Cash Flows Statements

As we analyze the table below, we can see that HDFC Bank faced challenges in its cash flows from operating activities during the fiscal year 2012, resulting in a negative figure. The net cash flow, which represents the overall change in cash for that period, was also negative. This could be a cause for concern since operating cash flows reflect the money generated or used in the bank’s day-to-day operations, including revenue generation, expenses, and managing working capital.

Over the subsequent years, the bank encountered fluctuations in its cash flows from operating activities, which might have raised some eyebrows. These fluctuations highlight the importance of managing operational efficiency and ensuring a consistent cash flow to support the bank’s ongoing business activities.

fundamental analysis of HDFC bank: Cash flow statements.
Cash Flow statements of HDFC Bank in the last 10 years. Source: screener. in

For investors, creditors, and stakeholders, understanding the trends in cash flows from operating activities is crucial as it reflects the bank’s ability to sustain its operations and indicates the financial health of the institution. Monitoring these trends helps assess the bank’s performance and resilience over time, providing valuable insights for making informed financial decisions.

Comparison between Income Statements and Cash Flows Statements.

When conducting a fundamental analysis of HDFC Bank and examining both the Income Statement and the Cash Flow Statement, an important observation emerges. We observe that the cash flows from operational activities in the March quarter of FY 2023 amount to 20,814 crores, while the Net Income or Net Profit for the same period stands at a higher figure of 46,149 crores.

In an ideal scenario, it is generally preferred to have cash flows from operational activities exceeding the Net Income. This indicates a robust and healthy growth outlook for the company. Higher cash flows from operations signify that the company is generating substantial cash through its core business activities, which is essential for its financial stability and ability to invest in future growth opportunities.

In the case of HDFC Bank, the fact that the cash flows from operational activities are lower than the net income indicates that there may be other factors at play impacting the overall cash position. These factors could include changes in working capital, investments, or other non-operational activities affecting the cash flow statement.

While a higher cash flow from operational activities is generally preferred, it is crucial to consider the broader financial context and analyze the trends in cash flows over time. This will provide a more comprehensive understanding of HDFC Bank’s financial health and growth prospects, enabling a more informed assessment of its performance.

Analyzing Key Performance Indicators

Profitability Ratios

Over the last three years, the bank has shown a remarkable track record by maintaining a strong ROA of 1.91%. This demonstrates the bank’s capacity for profit-generating asset utilisation.

Additionally, the business has a proven track record of producing a favourable ROE, with a three-year average of 16.56%. This demonstrates how successfully the bank produces returns for its shareholders depending on their investments.

Key Metrics

Let’s learn further the key metrics in our fundamental analysis of HDFC Bank.

The NIM, which has stayed constant at 3.76% over the previous three years, is another indicator of consistency. This displays the bank’s capacity for managing interest revenue and costs in a way that generates ongoing profitability.

In the previous three years, the bank has maintained an average NET NPA ratio of 0.36%, demonstrating efficient management of its non-performing assets. This demonstrates the bank’s proactive approach to risk management and its capacity to handle and ease concerns about credit quality.

The bank has also managed to maintain a respectable current account to savings account ratio, with CASA deposits making up 48.17% of all deposits. This shows that the bank has been successful in establishing a steady stream of inexpensive deposits, which helps to increase profitability.

Other Incomes- Fees, commissions, and investments have been substantial contributions to the bank’s overall income, accounting for 23.10% of it. The bank’s overall financial stability is improved by this variety of revenue sources.

The Cost to Income ratio, which stands at 36.88%, reflects the bank’s efficiency in managing its operating expenses relative to its total income. This highlights the bank’s focus on cost control and optimization.

Lastly, the bank maintains a favourable Capital Adequacy Ratio of 18.90%, indicating its strong capital position and ability to absorb potential losses. This enhances the bank’s resilience and ability to meet regulatory requirements while supporting its growth initiatives.

Highlighting Some Important Aspects- Fundamental Analysis of HDFC Bank

The company has delivered good profit growth of 20.0% CAGR over the last 5 years and a profit growth of 21% trailing twelve months. Over the 3 years, the bank’s share price is up 16%. And over the last one year, it is up 26.5%. Share price has moved up from Rs 1,345.7 to Rs 1,701.8, registering a Gain of Rs 356.1.

Fundamental Analysis of HDFC bank. Income Graph of HDFC Bank.
Income Graph of HDFC Bank. Source: investing.com

In our fundamental analysis of HDFC Bank, we detected that the stock of the company is currently trading at 3.81 times its book value, indicating that investors perceive the company’s assets to be undervalued compared to its market price.

It is important to note that the company has a low-interest coverage ratio. This implies that the company’s earnings may not be sufficient to cover its interest expenses. A low-interest coverage ratio can raise concerns about the company’s ability to meet its interest obligations and may indicate financial strain.

Moreover, the company has contingent liabilities amounting to Rs. 14,57,166 Crores. Contingent liabilities represent potential obligations that may arise in the future, depending on the occurrence or non-occurrence of certain events. While these liabilities are not certain or recognized at present, they pose a risk to the company’s financial position if they materialize.

There is a possibility that the company is capitalizing on the interest cost. Capitalizing interest refers to the practice of including interest expenses as part of the cost of acquiring or constructing long-term assets.

A Closer Look At the Company’s Annual Income Statement

In our next step of fundamental analysis of HDFC bank, let’s learn the annual performance of the stock. Annual Revenue rose 22%, in the last year to Rs 204,666.1 Crores. Annual Net Profit rose 20.9% in the last year to Rs 45,997.1 Crores. Stock Price rose 26.2% and underperformed its sector by 10.2% in the past year. Promoter Share Holding decreased by 0% in the most recent quarter to 25.6%.
price-to-earnings ratio 
is 20.7, lower than its sector PE ratio of 25.3.

Fundamental Analysis of HDFC Bank
Financial report of HDFC Bank. Source: https://www.google.com/finance

HDFC BANK earnings for the last quarter were 21.60 INR whereas the estimation was 21.73 INR which accounts for -0.59% surprise. Company revenue for the same period amounts to 320.83B INR despite the estimated figure of 314.19B INR.

Estimated earnings for the next quarter are 24.60 INR, and revenue is expected to reach 355.11B INR. 


In conclusion, the fundamental analysis of HDFC Bank highlights several key aspects. The bank has consistently demonstrated strong financial performance, with increasing revenues and net profits over the years. It has maintained healthy ratios such as ROA, ROE, and NIM, indicating efficient operations and profitability. The bank has effectively managed non-performing assets and maintained a good Capital Adequacy Ratio. Additionally, the company’s focus on low-cost deposits and diversification of income sources through other income contribute to its stability and revenue generation. However, certain areas of concern include a low-interest coverage ratio and contingent liabilities that need to be carefully monitored. Overall, HDFC Bank’s solid track record, growth prospects, and prudent financial management make it an attractive player in the banking sector.

That’s all for today’s post. Hope you get some valuable insight from here.

Thank You!

Happy Reading!


The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a while. The post does not consist of any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfil their responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.

1 thought on ““Fundamental Analysis of HDFC Bank: Unlocking Insights””

  1. Pingback: Wipro Fundamental Analysis: Beneath the Surface - Daily stocks Dekho

Comments are closed.

Scroll to Top