The bank sees yet another quarter of consistent performance.
HDFC Bank registered 16.6 per cent year-on-year growth in its net interest income and 31.5 per cent growth in net profit in the September quarter. While it just about managed to meet Street expectations on the bottomline front, the net interest income, at Rs 2,945 crore, was slightly lower than expectations.
Despite macroeconomic headwinds, the bank was able to maintain its net non-provisioning assets at 0.2 per cent on a sequential basis. At 81.3 per cent, the provision coverage ratio was also healthy. Given the bank’s low exposure to risky sectors like power (two per cent of total loan book) and microfinance institutions (0.3 per cent), it is better placed than many peers to maintain its asset quality. However, it has significant exposure (around 15 per cent) to the small and medium enterprises (SME) segment, which may need to be watched carefully for any asset quality pressures, going forward. Further, a fall of 19.5 per cent year-on-year in provisions and contingencies aided bottomline growth.
HDFC Bank’s loan growth stood at a healthy 25.6 per cent, up 560 basis points over the June quarter. According to the management, while retail loan growth remained on track, growth in the corporate lending segment was mainly led by working capital loans and ongoing loans. The bank has not witnessed significant demand for new capex loans by corporate India. The loan book was boosted by 38-40 per cent year-on-year growth in business banking loans to SMEs, commercial vehicle, construction equipment and home segments.
Though the deposit growth has nearly halved from 30.4 per cent in the year-ago quarter, at 18.1 per cent, it was higher than the 15.4 per cent seen in the June quarter, and in line with the management’s aim.
Despite the tough macroeconomic environment, at 4.1 per cent, the bank was able to control its net interest margin compression to 10 basis points. This is within the management’s target range of 3.9-4.2 per cent.
The scrip outperformed the BSE Sensex on Wednesday, to close three per cent higher compared to the Sensex’s gains of 2 per cent. Against its historical average of 3.5 times, the stock is currently trading at 3.2 times its adjusted FY13 book value. Analysts believe the stock can offer upsides of 8-10 per cent from the current levels.
