On Aug 19, 2013, we reaffirmed our Neutral recommendation on
HDFC Bank Ltd.
). This was based on the company's strong fiscal first-quarter
2014 results, in spite of the rise in operating expenses.
HDFC Bank's fiscal first-quarter (ended Jun 30) net profit of
INR18.44 billion ($0.33 billion) rose 30.1% year over year.
Results benefited from increased revenues, partially offset by
higher operating expenses. Moreover, the company reported
significant growth in deposits and loan balances.
Following the earnings release, the Zacks Consensus Estimate for
fiscal 2014 advanced 2.2% to $1.88 per share over the last 30
days. However, for fiscal 2015, the Zacks Consensus Estimate fell
3.8% to $2.26 per share over the same time-frame. Hence, HDFC
Bank currently carries a Zacks Rank #3 (Hold).
HDFC Bank remains focused on maintaining robust earnings growth
through conservative risk management techniques and low-cost
funding. Additionally, the Retail Banking segment is expected to
be the main driver for future growth. With its extensive branch
network and strong brand equity, the company has been able to
gain a large share of the retail credit market.
Increase in operating expenses is a major concern for HDFC Bank,
as it is expected to drag the company's bottom line in the coming
quarters. Further, the company's ongoing expansion will likely
lead to deterioration in asset quality.
Other Foreign Banks Worth Considering
Better performing foreign banks include
Mitsubishi UFJ Financial Group, Inc.
The Bank of Nova Scotia
). All these stocks carry a Zacks Rank #2 (Buy).
BARCLAY PLC-ADR (BCS): Free Stock Analysis
BANK OF NOVA SC (BNS): Free Stock Analysis
HDFC BANK LTD (HDB): Free Stock Analysis
MITSUBISHI-UFJ (MTU): Free Stock Analysis
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