HDFC Bank Continues Robust Perfomance

As per the streets expectations, India's largest Private sector bank by market capitalization posted robust set of September quarter numbers of 2012. The results came in line with the streets estimates of stable asset quality, sustainable margin and a hand some profit growth for the bank.The following table shows us performance of banks  key financial parameters: 

The bank earlier in more than 35 quarters, has posted quarterly Net Profit growth of 30 plus per cent on YoY basis. This convince us that the bank has been a consistent performance in every business cycle. For the September quarter of 2012, Net Interest Income (NII) of the bank increased by 26.7 per cent to Rs 3713.7 crores while the net profit grew by 30.1 per cent to Rs 1560 crore. Other Income which includes fees and commission, foreign exchange and derivatives etc also grew by 11 per cent to Rs 1345 crores. Provision of the bank decreased by 20 per cent to Rs 293 crore.

Asset quality continued to be remain stable and also at very low level. Gross NPA declined by 9 basis points to 0.91 per cent while the Net NPA continued to remained stable at 0.2 per cent of the total loans. Bank continued to maintained high Provision coverage ratio (PCR) which stood at 82 per cent as on 30^th September 2012. We continue to believe that, the bank has a good quality loan book and would keep its NPA at low level going ahead. Net Interest Margin (NIM) of the bank also stood at 4.2 per cent which is one of the best in the industry. As on 30^th September 2012, Capital Adequacy Ratio (CAR) of the bank stood at 17 per cent, and the Tier 1 CAR stood at 11.4 per cent.

HDFC bank also posted robust business growth. Net advances of the bank increased by 22.9 per cent to Rs 231649 crores while the deposits grew at the rate of 18.8 per cent to Rs 274130 crore. The bank witnessed a drop is CASA ratio by 140 basis points to 45.9 per cent. The bank has not changed its saving account interest rates like other small private sector bank which are attracting customers with high interest rates.

As of September 30, 2012, the Bank’s distribution network was at 2,620 branches and 10,316 ATMs in 1,454 cities. On the valuation front the bank is currently trading at Price to book value of around 4.5 times. We believe the bank would command such high premium as it has been consistent performer in all the financial parameters. We at DSIJ, earlier had given a buy recommendation to the bank and we continue to hold our rating as we believe it is one of the scrip which is a must in portfolio.