Overview of HDFC Bank

HDFC Bank Ltd.
Profile
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.
Promoters
HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.
Business Focus
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values - Operational Excellence, Customer Focus, Product Leadership and People.


Capital Structure
The authorised capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The paid-up capital is Rs.311.9 crore (Rs.3.1 billion). The HDFC Group holds 22.1% of the bank's equity and about 19.4% of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). Roughly 31.3% of the equity is held by Foreign Institutional Investors (FIIs) and the bank has about 190,000 shareholders. The shares are listed on the The Stock Exchange, Mumbai and the National Stock Exchange. The bank's American Depository Shares are listed on the New York Stock Exchange (NYSE) under the symbol "HDB

Times Bank Amalgamation
In a milestone transaction in the Indian banking industry, Times Bank Limited (another new private sector bank promoted by Bennett, Coleman & Co./Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank. The acquisition added significant value to HDFC Bank in terms of increased branch network, expanded geographic reach, enhanced customer base, skilled manpower and the opportunity to cross-sell and leverage alternative delivery channels.


Distribution Network
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over
Branches()
535 branches spread over
City()
228 cities across India. All branches are linked on an online real-time basis. Customers in over 120 locations are also serviced through Telephone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centres where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE have a strong and active member base. The Bank also has a network of about over
atms()
1200 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.

Management
Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor was a Deputy Governor of the Reserve Bank of India.The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years, and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.The Bank's Board of Directors is composed of eminent individuals with a wealth of experience in public policy, administration, industry and commercial banking. Senior executives representing HDFC are also on the Board. Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing Director. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in the industry, the bank believes that its people are a significant competitive strength.
Technology
HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the bank's branches have online connectivity, which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The Bank has made substantial efforts and investments in acquiring the best technology available internationally, to build the infrastructure for a world class bank. In terms of software, the Corporate Banking business is supported by Flexcube, while the Retail Banking business by Finware, both from i-flex Solutions Ltd. The systems are open, scaleable and web-enabled. The Bank has prioritised its engagement in technology and the internet as one of its key goals and has already made significant progress in web-enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share.

HDFC Bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments:
Wholesale Banking ServicesThe Bank's target market ranges from large, blue-chip manufacturing companies in the Indian corporate to small & mid-sized corporates and agri-based businesses. For these customers, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. The bank is also a leading provider of structured solutions, which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. Based on its superior product delivery / service levels and strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of leading Indian corporates including multinationals, companies from the domestic business houses and prime public sector companies. It is recognised as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock exchange members and banks.
Retail Banking Services The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed by world-class service and delivered to the customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, NetBanking and Mobile Banking.The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have been designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various investment avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider of Depository Participant (DP) services for retail customers, providing customers the facility to hold their investments in electronic form.HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Mastercard Maestro debit card as well. The Bank launched its credit card business in late 2001. By September 30, 2005, the bank had a total card base (debit and credit cards) of 5.2 million cards. The Bank is also one of the leading players in the "merchant acquiring" business with over 50,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments.
TreasuryWithin this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the liberalisation of the financial markets in India, corporates need more sophisticated risk management information, advice and product structures. These and fine pricing on various treasury products are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio.
Businesses

Rating
Credit Rating The Bank has its deposit programs rated by two rating agencies - Credit Analysis & Research Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents instruments considered to be "of the best quality, carrying negligible investment risk". CARE has also rated the bank's Certificate of Deposit (CD) programme "PR 1+" which represents "superior capacity for repayment of short term promissory obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "tAAA ( ind )" rating to the Bank's deposit programme, with the outlook on the rating as "stable". This rating indicates "highest credit quality" where "protection factors are very high".The Bank also has its long term unsecured, subordinated (Tier II) Bonds rated by CARE and Fitch Ratings India Private Limited and its Tier I perpetual Bonds and Upper Tier II Bonds rated by CARE and CRISIL Ltd. CARE has assigned the rating of "CARE AAA" for the subordinated Tier II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA (ind)" with the outlook on the rating as "stable". CARE has also assigned "CARE AAA [Triple A]" for the Banks Perpetual bond and Upper Tier II bond issues. CRISIL has assigned the rating "AAA / Stable" for the Bank's Perpetual Debt programme and Upper Tier II Bond issue. In each of the cases referred to above, the ratings awarded were the highest assigned by the rating agency for those instruments.
Corporate Governance RatingThe bank was one of the first four companies, which subjected itself to a Corporate Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating Information Services of India Limited (CRISIL). The rating provides an independent assessment of an entity's current performance and an expectation on its "balanced value creation and corporate governance practices" in future. The bank has been assigned a 'CRISIL GVC Level 1' rating which indicates that the bank's capability with respect to wealth creation for all its stakeholders while adopting sound corporate governance practices is the highest
.
Awards
HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian Bank". We realised that only a single-minded focus on product quality and service excellence would help us get there. Today, we are proud to say that we are well on our way towards that goal.
It is extremely gratifying that our efforts towards providing customer convenience have been appreciated both nationally and internationally.
2007
The Asian Banker Excellence in Retail Financial Services Awards
Best Retail Bank in India
Asian Banker
Our Managing Director Aditya Puri wins the Leadership Achievement Award for India

2006
Business Today
Best Bank in India.
Forbes Magazine
One of Asia Pacific's Best 50 companies.
Businessworld
Best listed Bank of India.
The Asset Magazine's Triple A Country Awards
Best Domestic Bank.
Asiamoney Awards
Best Local Cash Management Bank in Large and Medium segments.
Euromoney Awards
"Best Bank" in India.

HDFC BANK LTD. - FINANCIAL RESULTS (INDIAN GAAP) FOR
THE QUARTER & HALF-YEAR ENDED SEPTEMBER 30, 2007
The Board of Directors of HDFC Bank Limited approved the bank’s accounts for
the quarter and half- year ended September 30, 2007 at its meeting held on Friday,
October 12, 2007. The accounts have been subjected to limited review by the
bank’s statutory auditors.
FINANCIAL RESULTS
Quarter ended September 30, 2007
The total income of the bank for the quarter ended September 30, 2007 grew by
44.0% over the corresponding quarter ended September 30, 2006 to Rs.2,845.1
crores. Net revenues (net interest income plus other income) for the quarter ended
September 30, 2007 were Rs.1,645.1 crores, an increase of 38.7% over Rs.1,185.7
crores for the corresponding quarter of the previous year. Interest earned (net of
loan origination costs and amortization of premia on investments held in the Held
to Maturity (HTM) category) increased from Rs.1,578.0 crores for the quarter
ended September 30, 2006 to Rs.2,362.8 crores for the quarter ended September
30, 2007. Net interest income (interest earned less interest expended) for the
quarter ended September 30, 2007 increased by Rs.374.7 crores to Rs.1,162.7
crores, up by 47.6%. This was driven by an average asset growth of 39.4% and a
core net interest margin (NIM) of 4.0% as against 3.8% for the quarter ended
September 30, 2006 (NIMs adjusted for the HTM premia amortization).
Other income (non-interest revenue) for the quarter ended September 30, 2007
was Rs.482.4 crores, as against Rs.397.7 crores for the corresponding quarter of
the previous year. Its principal component was fees and commissions contributing
Rs.391.9 crores for the quarter ended September 30, 2007, a growth of 24.8% over
the corresponding quarter of the previous year. The other two components of other
income were foreign exchange/derivatives revenues of Rs.38.7 crores and profit
on sale/revaluation of investments of Rs.46.2 crores for the quarter ended
September 30, 2007 as against Rs.58.2 crores and Rs.20.6 crores respectively, for
the quarter ended September 30, 2006. Operating (non-interest) expenses for the
quarter increased by Rs.239.3 crores to Rs.818.4 crores and were 49.7 % of net
revenues. Provisions and contingencies for the quarter were Rs.289.4 crores
(against Rs.248.1 crores for the corresponding quarter ended September 30, 2006),
principally comprising of specific and general loan loss provisions of Rs.273.2
crores. After providing Rs.168.8 crores for taxation, the bank earned a Net Profit
of Rs.368.5 crores, an increase of 40.1% over the quarter ended September 30,
2006.
Total balance sheet size increased by 44.1% from Rs.84,363 crores as of
September 30, 2006 to Rs.1,21,545 crores as of September 30, 2007. Total
deposits were Rs.91,069 crores, an increase of 43.5% from September 30, 2006.
With savings account deposits of Rs.22,373 crores and current account deposits at
Rs.25,456 crores, the CASA mix was healthy at 52.5% of total deposits as at
September 30, 2007. Deposits as of September 30, 2007, included around Rs.3000
crores of collections held in current accounts as a banker to various initial public
offerings. The Bank’s total customer assets (including advances, corporate
debentures, investments in securitised paper, etc) increased to Rs.65,812 crores as
of September 30, 2007, from Rs.49,326 crores as of September 30, 2006, a growth
of 33.4%. Retail loans grew 37.1% on a year-on-year basis to Rs.34,568 crores,
and now form 55.1% of gross advances.
Half-Year ended September 30, 2007:
For the half-year ended September 30, 2007, the Bank earned total income of
Rs.5,486.8 crores as against Rs.3,771.0 crores in the corresponding period of the
previous year. Net revenues (net interest income plus other income) for the six
months ended September 30, 2007 were Rs.3,203.1 crores, up by 39.6% over
Rs.2,294.2 crores for the six months ended September 30, 2006. Net Profit for the
half-year ended September 30, 2007 was Rs.689.7 crores, up by 37.3%, over the
corresponding six months ended September 30, 2006.
BUSINESS UPDATE:
The bank’s business momentum remained healthy in both its retail and wholesale
customer franchises. The distribution network was well spread with 754 branch
outlets and 1800 ATMs in 327 cities. Portfolio quality as of September 30, 2007
remained healthy with net non-performing assets at 0.4% of total customer assets.
During the quarter ended September 30, 2007, the Bank made a public offering in
July 2007 of 6,594,504 American Depositary Shares (ADS), each ADS
representing three equity shares, at a price of $ 92.10 per ADS. The net proceeds
of the ADS issue were Rs. 2,393.9 crores. As a result, Capital Adequacy Ratio
(CAR) as of September 30, 2007 was 14.9% against the regulatory minimum of
9%. Tier I CAR was at 11.3%.