HDFC Bank Ltd.
) reported its fiscal third-quarter 2013 (ended Dec 31, 2012) net
profit of INR18.59 billion ($0.34 billion), exhibiting an
improvement of 30.0% from the prior-year quarter. Total revenue
growth remains the driving force behind the impressive earnings.
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Improvements in net interest income and fee revenue were among
the positives during the quarter. However, these were partially
offset by higher operating expenses. Moreover, the company
reported significant hikes in deposits and loans.
HDFC Bank's net revenue for the quarter soared 23.4% year over
year to INR55.98 billion ($1.04 billion).
Net interest income improved 21.9% year over year to INR37.99
billion ($0.70 billion). The increase was primarily driven by
strong loan growth of 24.3% and a stable net interest margin of
4.1% in the reported quarter.
Non-interest revenues of INR17.99 billion ($0.33 billion) grew
26.7% from the prior-year quarter. This was primarily led by a
23.4% jump in fees and commissions and substantial gain on
revaluation of investments, partially offset by a 29.4% dip in
foreign exchange & derivative revenues.
HDFC Bank's operating expenses totaled INR25.74 billion ($0.48
billion), growing 19.3% from the prior-year quarter. The core
cost-to-income ratio in the reported quarter came in at 47.1%
compared with 49.4% as of Sep 30, 2012.
HDFC Bank's total deposits grew 22.2% from the prior-year quarter
to INR2.84 trillion ($0.05 trillion). Likewise, total net
advances escalated 24.3% year over year to INR2.42 trillion
Asset quality continued to remain strong with gross nonperforming
assets (NPAs) at 1.00% of gross advances, down 3 basis points
(bps) year over year. Further, net NPAs remained healthy at 0.20%
of net advances, unchanged from the year-ago period.
Moreover, provisions and contingencies dipped 6.7% year over year
to INR3.07 billion ($0.06 billion).
HDFC Bank's total capital adequacy ratio (CAR) as of Dec 31, 2012
(computed as per Basel II guidelines) remained strong at 17.0%,
higher than the regulatory minimum of 9.0%. Additionally, Tier-I
CAR was 10.9% as of Dec 31, 2012 compared with 11.4% as of Sep
HDFC Bank has extensively enhanced its distribution network over
the last couple of years. As of Dec 31, 2012, the company had
2,776 branches and 10,490 ATMs in 1,568 cities compared with
2,201 branches and 7,110 ATMs in 1,174 cities as of Dec 31, 2011.
We expect HDFC Bank's exposure to the fast-growing Indian retail
credit sector to boost its overall growth prospects. Also, the
company's efforts to expand its branch network will result in
higher deposits and loans. Nevertheless, continuously 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 retains a Zacks Rank #5 (Strong Sell).
However, other foreign banks namely
Banco Macro S.A.
) retain a Zacks Rank #1 (Strong Buy) and are highly recommended