HDFC Bank Ltd.
) reported fiscal second-quarter 2014 (ended Sep 30) net profit
of INR19.82 billion ($0.32 billion), up 27.1% from the prior-year
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An increase in both net interest income and fee revenues were the
positives for the quarter. However, these were partially offset
by higher operating expenses. Moreover, there was considerable
improvement in the company's deposits and loans as well as credit
HDFC Bank's net revenue for the quarter rose 18.1% year over year
to INR 63.20 billion ($1.02 billion).
Net interest income increased 15.3% year over year to INR44.77
billion ($0.72 billion). The rise was primarily driven by loan
growth of 16.0%, partially offset by a 10-bps decline in interest
margin to 4.3%.
Non-interest revenues of INR18.44 billion ($0.30 billion) grew
25.3% from the prior-year quarter. This was due to increase in
fees & commissions, foreign exchange & derivatives
revenues as well as miscellaneous income, partially offset by a
rise in loss on revaluation/sale of investments.
HDFC Bank's operating expenses totaled INR29.34 billion ($0.47
billion), up 9.3% from the prior-year quarter. The cost-to-income
ratio came in at 46.4%, compared with 50.2% as of Sep 30, 2012.
As of Sep 30, 2013, HDFC Bank's total deposits increased 17.8%
year over year to INR3.13 trillion ($0.05 trillion). Likewise,
net advances rose 16.0% to INR2.69 trillion ($0.04 trillion) year
Asset quality was a mixed bag with gross nonperforming assets
(NPAs) at 1.09% of gross advances, compared with 1.04% in the
year-ago quarter. Net NPAs remained healthy at 0.3% of net
Moreover, provisions and contingencies dipped 1.0% year over year
to INR3.86 billion ($0.06 billion).
HDFC Bank's total capital adequacy ratio (CAR) as of Sep 30, 2013
(computed as per Basel III guidelines) was 14.6%, higher than the
regulatory minimum of 9.0%. Additionally, Tier-I CAR was 9.9% as
of Sep 30, 2013.
HDFC Bank has significantly enhanced its distribution network
over the last couple of years. As of Sep 30, 2013, the company
had 3,251 branches and 11,177 ATMs in 2,022 cities, compared with
2,620 branches and 10,316 ATMs in 1,454 cities as of Sep 30,
Persistently rising operating expenses, intense competition in
the retail space with local peers such as
ICICI Bank Ltd.
), UTI Bank, IDBI Bank and IndusInd Bank remain causes of
On the bright side, we expect the company's initiatives on
expanding its branch network to drive higher deposits and loans,
thereby boosting growth going forward.
HDFC Bank currently carries a Zacks Rank #5 (Strong Sell).
However, other foreign banks such as
Credit Suisse Group AG
Deutsche Bank AG
), both with a Zacks Rank #1 (Strong Buy) are highly recommended