HDFC Bank Ltd.
) ADRs fell 2.2% on Tuesday following the bank's fourth-quarter
fiscal 2014 (ended Mar 31) net profit of INR23.27 billion ($0.38
billion), up 23.1% from the prior-year quarter. The rise was the
lowest that the bank witnessed in a decade and resulted from a
weaker Indian economy.
Further, for fiscal 2014, net income grew 26.0% year over year to
INR84.78 billion ($1.42 billion).
An increase in both net interest income and fee revenues were
positives for the quarter. However, these were partially offset
by higher operating expenses. Moreover, deposit and loan balances
as well as credit quality continued to show improvement.
HDFC Bank's net revenue for the quarter increased 14.0% year over
year to INR69.54 billion ($1.13 billion).
Net interest income rose 15.3% year over year to INR49.53 billion
($0.80 billion). The rise was primarily driven by average asset
growth of 20.3%.
Non-interest revenues of INR20.01 billion ($0.32 billion) grew
11.0% from the prior-year quarter. The increase was driven by
rise in fees & commissions, foreign exchange &
derivatives revenues and miscellaneous income, partially offset
by lower gains on revaluation/sale of investments.
Operating expenses totaled INR31.75 billion ($0.51 billion), up
1.2% from the prior-year quarter. The cost-to-income ratio came
in at 45.7%, compared with 51.4% as of Mar 31, 2013.
As of Mar 31, 2014, total deposits increased 24.0% year over year
to INR3.67 trillion ($0.06 trillion). Likewise, advances rose
26.4% to INR3.03 trillion ($0.05 trillion) year over year.
Additionally, HDFC Bank's total capital adequacy ratio (CAR) as
of Mar 31, 2014 (computed as per Basel III guidelines) was 16.1%,
higher than the regulatory minimum of 9.0%. Moreover, Tier-I CAR
was 11.8% as of Mar 31, 2014.
Asset quality continued to show improvement with provisions and
contingencies declining 4.8% year over year to INR2.86 billion
($0.05 billion). Further, gross nonperforming assets remained
unchanged at 1.0% of gross advances.
Additionally, total restructured loans were 0.2% of gross
advances as of Mar 31, 2014, signaling strong balance sheet.
Growth in Network
HDFC Bank has significantly widened its distribution network over
the last few of years. During fiscal 2014, the bank added 341
branches, taking the total number of branches to 3,403 as of Mar
31, 2014 in 2,171 cities, against 3,062 branches in 1,845 cities
as of Mar 31, 2013. Further, total number of ATMs increased to
11,256 as of Mar 31, 2014 from 10,743 in the previous year.
We expect HDFC Bank's initiatives on expanding its branch network
to drive higher deposits and loans, thereby boosting growth going
forward. However, persistently rising operating expenses,
slowdown in the Indian economy and intense competition in the
retail space from local peers like
ICICI Bank Ltd.
), UTI Bank, IDBI Bank and IndusInd Bank remain causes of
HDFC Bank currently carries a Zacks Rank #2 (Buy).
Among other foreign banks,
HSBC Holdings plc
) are scheduled to report first-quarter 2014 results on May 6 and
May 7, respectively.
BARCLAY PLC-ADR (BCS): Free Stock Analysis
HDFC BANK LTD (HDB): Free Stock Analysis
HSBC HOLDINGS (HSBC): Free Stock Analysis
ICICI BANK LTD (IBN): Free Stock Analysis
To read this article on Zacks.com click here.