HDFC Bank Ltd.
) reported its fiscal fourth-quarter 2013 (ended Mar 31) net
profit of INR18.90 billion ($0.35 billion), an improvement of
30.1% from the prior-year quarter. Similarly, for fiscal 2013,
net profit was INR67.26 billion ($1.23 billion), surging 30.2%
year over year.
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Improvements in net interest income and in fee revenues were
among the positives during the quarter. However, these were
partially offset by higher operating expenses. Moreover, the
company reported significant increases in deposits and loans.
HDFC Bank's net revenue for the quarter soared 17.5% year over
year to INR61.00 billion ($1.12 billion). For fiscal 2013, net
revenues stood at INR226.64 billion ($4.15 billion), up 21.4%
Net interest income improved 20.6% year over year to INR42.95
billion ($0.79 billion). The rise was primarily driven by a
strong loan growth of 22.7% and a stable net interest margin of
4.5% in the reported quarter.
Non-interest revenues of INR18.04 billion ($0.33 billion) grew
10.7% from the prior-year quarter. This was due to an increase in
all the components of non-interest income.
HDFC Bank's operating expenses totaled INR31.36 billion ($0.58
billion), growing 17.7% from the prior-year quarter. The core
cost-to-income ratio in the reported quarter came in at 51.4%
compared with 51.3% as of Mar 31, 2012.
As of Mar 31, 2013, HDFC Bank's total deposits increased 20.1%
year over year to INR2.96 trillion ($0.05 trillion). Likewise,
net advances escalated 22.7% from the prior-year quarter to
INR2.40 trillion ($0.04 trillion).
Asset quality continued to be strong with gross nonperforming
assets (NPAs) at 0.97% of gross advances, down 5 basis points
year over year. Further, net NPAs remained healthy at 0.2% of net
Moreover, total floating provisions dipped 27.9% year over year
to INR18.35 billion ($0.34 billion).
HDFC Bank's total capital adequacy ratio (CAR) as of Mar 31, 2013
(computed as per Basel II guidelines) improved to 16.8% from
16.5% as of Mar 31, 2012 and higher than the regulatory minimum
of 9.0%. Additionally, Tier-I CAR was 11.1% as of Mar 31, 2013
compared with 11.6% as of Mar 31, 2012.
HDFC Bank has extensively enhanced its distribution network over
the last couple of years. As of Mar 31, 2013, the company had
3,062 branches and 10,743 ATMs in 1,845 cities compared with
2,544 branches and 8,913 ATMs in 1,399 cities as of Mar 31, 2012.
We expect HDFC Bank's exposure to the fast-growing Indian retail
credit sector to boost its overall growth prospects.
Additionally, the company's efforts to expand its branch network
will result in higher deposits and loans.
However, steadily rising operating expenses have the potential to
thwart its growth prospects going forward. Mounting competition
in the retail space with the re-entry of peers such as
ICICI Bank Limited
), UTI Bank, IDBI Bank and IndusInd Bank is also an added
HDFC Bank currently carries a Zacks Rank #4 (Sell). However,
other foreign banks namely
Banco Macro S.A.
Deutsche Bank AG
) carry a Zacks Rank #1 (Strong Buy) and are highly recommended