Beating estimates, HDFC Bank posted a net profit of Rs 1,088 crore, up 20 per cent sequentially and 33 per cent year-on-year, as against the consensus expectation of 30 per cent. The growth was mainly attributed to improved asset quality, which required lower-than-expected loan-loss provisioning.
Net interest income (NII) increased 25 per cent year-on-year to Rs 2,777 crore, up 10 per cent sequentially, with credit-to-deposit ratio expanding 240 basis points (bps) to 82.8 per cent.
Net interest margins were flat sequentially at 4.2 per cent. However, they slipped 10 bps year-on-year, as compared to flat margins reported by ICICI Bank (2.6 per cent). SBI reported a stronger performance, with margin expansion of nearly 20 bps sequentially and 80 bps year-on-year to 3.6 per cent.
Other income growth was buoyant at over 30 per cent year-on-year, mainly from strong forex and derivative gains (over 40 per cent year-on-year and sequentially). Fee income also continued to grow, rising 30 per cent y-o-y to Rs 943 crore (10 per cent sequentially). Treasury losses were lower sequentially, but came in 15 per cent higher compared to the same period a year ago.
Operationally, advances and deposit growth tapered off and was flat sequentially, with advances growing 1.3 per cent and deposits declining 1.6 per cent. The low cost deposit ratio (current and savings account) also dipped marginally by 10 bps to 50.5 per cent.
Asset quality continued to improve, with gross non-performing assets (GNPA) falling three per cent sequentially and GNPA ratio to total assets dipping 10 bps to 1.1 per cent, with a similar reduction in the net NPA ratio. Provision coverage increased 300 bps sequentially and 900 bps year-on-year to 81 per cent, excluding write-offs. Restructured assets were 0.3 per cent of the total book.
While the stock is down nearly 10 per cent in the last three months, reflecting sectoral issues, it still trades at a lofty 3.3 times the consensus 2011-12 book value per share estimates.
