HDFC Bank Sees Another 30% Jump In Profits In Q1FY14

Banking major HDFC Bank announced its first quarter results of of FY14 on July 17. The numbers were largely in line with the street’s estimates. However, some cracks showed up in the bank’s asset quality.

During the quarter, the net profit of the bank rose by a healthy 30% YoY yet again to touch Rs 1843.86 crore. This increase followed higher Net Interest Income (NII), Other Income and lower provisioning on a yearly basis.

The Net Interest Income jumped by 21% and stood at Rs 4418.7 crore for Q1FY14 against the market’s expectation of Rs 4360 crore. This was helped by the 21.2% increase in loans on a yearly basis. Loan growth was contributed by both segments of the bank’s loan portfolio, with retail loans growing by 25.5% and wholesale loans by 16.5%.

Its Other Income, which has a share of 30% in the total revenues, grew by 16.7% to Rs 1925.6 crore. Provisions (other than tax) have declined by 9% to Rs 527 crore for the quarter on a yearly basis, as against the expected figure of around Rs 450 crore. Sequentially, however, the provisioning has increased by 75%.

While the Gross NPAs as percentage of advances remained constant at 1%, the Net NPAs increased to 0.3% from that of 0.2% recorded at the end of the previous quarter (Q4FY13). The stress was largely visible in the Commercial Vehicles (CVs) segment.

The shares of HDFC Bank are currently trading at a price-to-book value of 4.5x. This may look expensive, but keeping the stable performance of the bank in mind, one can use this dip in the share prices as an opportunity to accumulate the stock.