HDFC Bank rises 6% in 4 days, hits 8-month high on strong Q2 results

In the past month, the stock has rallied 18 per cent, against 8 per cent gain in the S&P BSE Sensex

Shares of HDFC Bank were trading higher for the fourth straight day, up 1.5 per cent at Rs 1,241.75 on the BSE on Wednesday after the bank reported healthy September quarter (Q2FY21) results with net profit growing 18.4 per cent year-on-year (YoY) at Rs 7,513 crore on the back of substantial growth in interest earnings and other income.

The private sector lender's stock was trading at its highest level since February 14, 2020. In the past four trading days, HDFC Bank has outperformed the market by gaining 6 per cent, as compared to 3 per cent rise in the S&P BSE Sensex. In the past month, it has rallied 18 per cent, against 8 per cent gain in the benchmark index.

Net interest income (NII) for Q2FY21 grew 16.7 per cent YoY at Rs 15,776 crore, driven by asset growth of 21.5 per cent and a core interest margin for the quarter of 4.1 per cent. On asset front, gross non-performing assets (NPAs) of the bank fell to 1.08 per cent of the gross advances as on September 30, 2020, as against 1.38 per cent a year earlier. Likewise, net NPAs too came down to 0.17 per cent from 0.42 per cent.

Meanwhile, the lender informed that its board of directors, at the meeting held on Saturday, approved appointment of Sashidhar Jagdishan as an additional director and also managing director and chief executive officer of the bank.

The company's management remains optimistic about a cyclical recovery. Loan against property (LAP) and retail working capital loan disbursals are already at pre- Covid levels and unsecured loans will reach pre-Covid levels by October. Bureau data shows that inquiries for auto and home loans have moved above pre-Covid levels.

With focus on top end customers across segments, superior underwriting, and healthy provisioning & capital buffers (CET 1 ratio at 17 per cent), analysts at Dolat Capital expect HDFC bank to be amongst the best placed amidst current uncertainty. "We factor in incremental stress (RSA+ slippage) of 3.7 per cent for the bank," the brokerage said.