HDFC Bank Q4 net rises 21% to Rs 2,807 cr

Healthy loan growth & stable margins, as also NPAs; expects to maintain performance; cost to income ratio inches up to 44.9 due to branch expansion

HDFC Bank, the second largest private lender in the country, reported a 20.6 per cent rise in net profit to Rs 2,807 crore in the January-March quarter, the fourth (Q4) and final one of 2014-15.

Profit growth was in line with the Bloomberg estimate of Rs 2,825 crore. The bank also booked a higher trading profit of Rs 196 crore, as compared to Rs 33 crore a year before, with softening bond yields.

“We have also maintained the net interest margin (NIM), with asset quality staying under control,” said Paresh Sukthankar, deputy managing director. “Net interest income grew by 21.4 per cent to Rs 6,013 crore.” The  NIM was stable at 4.4 per cent.

While the loan book grew 20.6 per cent in the year, compared to the banking system's average of 12.7 per cent, the proportion of bad loans was stable. The ratio of net non-performing assets (NPAs) to the total was 0.2 per cent and gross NPAs were 0.93 per cent. Bad loan provisioning, however, went up to Rs 425 crore as compared to Rs 286 crore a year before; total provisioning was doubled to Rs 577 crore as compared to Rs 286 crore.

“Asset quality remained healthy. Both gross and net NPA was stable, quarter on quarter, in absolute terms but saw improvement in percentage terms due to the denominator effect. The bank continued to report strong liability franchise, while fee-based income growth was the fastest in nine quarters,” said Saday Sinha, analyst with Kotak Securities. Fee and commissions grew 20.6 per cent to Rs 1,835 crore.

The lender, which crossed the 4,000-branch mark by opening 611 more in 2014-15, the March quarter having added 355, saw the cost to income ratio inching up in Q4, to 44.9 from 42 in the October-December quarter.

Sukthankar said the plan was to open 300 branches this financial year but would not forecast on the cost to income ratio.

Deposits grew 22.7 per cent (the system average was 12.8 per cent), on the back of a healthy rise in savings and current account deposits, up 221.1 per cent and 19.6 per cent, respectively. The share of these low-cost deposits in the total jumped to 44 per cent as compared to 40.9 per cent at end-December.

After having recently reduced its base rate, the benchmark to which all loan rates are linked, the Deputy MD indicated further cuts were not likely soon. “The base rate cut of 15 basis points to 9.85 per cent was on the back of the earlier reduction in the deposit rate. After the base rate cut, we have not reduced deposit rates,” he said.

On loan growth in FY16, Sukthankar said the bank would continue to grow a “couple of percentage points higher” than the sector. “We expect GDP (gross domestic product) growth to pick up by a percentage point, which will mean the system loan growth could improve to 13-14 per cent,” he added.

“We expect HDFC Bank to retain premium valuation vis-à-vis its peers, on the back of consistent earnings growth, superior liability franchise, robust NIM and better asset quality. Hence, we retain our positive stance on the stock,” said Sinha.