HDFC Bank: Q2 Net Profit Jumps 27%

HDFC Bank, India's second biggest private sector bank, came out with its second quarter result for FY14 today. The net interest income (NII), i.e. the interest earned less interest expended of the bank came at Rs 4476 crore for the quarter, up by 15% on a yearly basis. This was a tad lower than analysts’ expectations of a figure around Rs 4575 crore. The NII growth was aided by the similar growth in Advances, which rose by 16% in the same period. 

Nonetheless, the net profit of the bank increased by 27.1% on a yearly basis to Rs 1982 crore. One of the reasons for such a good set of profit numbers was better growth in its Other Income, which was at Rs 1844 crore for the second quarter of the FY14, up 25 per cent on a yearly basis. Beside this, the cost-to-income ratio of the bank was lower at 46.4% as against 50.2 % for the corresponding quarter last year.

However, bank witnessed some stress in terms of asset quality. Its Gross Non-Performing Assets (NPA) were at 1.09% of the Gross Advances at the end of Q2FY14 as against 1.04% at the end of Q1FY14. Net NPA remained flat at 0.3% of the Net Advances for the quarter.

Post the results announcement, the shares of the bank dropped by a little over 2%. The stocks are currently trading at a price-to-book value of almost 2x, which makes the stock fairly valued. Hence, we do not advise fresh investment in this counter.