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HDFC Bank: Provisions eat into profits - Views on News from Equitymaster
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HDFC Bank: Provisions eat into profits
Feb 3, 2016

HDFC Bank declared the results for the third quarter of financial year ending March 2016 (3QFY16). The bank has reported 24% YoY and 20% YoY growth in net interest income and net profits respectively in 3QFY16. Here is our analysis of the results.

Performance summary

  • Net interest income grows 22.9% YoY in 9mFY16 on the back of 25.7% YoY growth in advances.
  • NIMs correct marginally to 4.3% due to lower loan yields.
  • Other income grows by a robust 23% YoY, with fees and commissions growing at 22% YoY.
  • Cost to income ratio remains stable at 44% at the end of December 2015.
  • Net NPA to advances move slightly higher to 0.3% in 9mFY16 despite higher provisioning, as the gross NPAs stay at 1% of advances.
  • Capital adequacy ratio (CAR) comfortable at 15.9%, Tier I CAR at 13.2% at the end of December 2015.

Financial Snapshot

Rs (m) 3QFY15 3QFY16 Change 9mFY15 9mFY16 Change
Interest income 123,958 154,111 24.3% 354,635 442,247 24.7%
Interest expense 66,959 83,426 24.6% 190,810 240,865 26.2%
Net Interest Income 56,999 70,685 24.0% 163,825 201,382 22.9%
Net interest margin (%)       4.4% 4.3%  
Other Income 25,349 28,721 13.3% 64,325 78,859 22.6%
Other Expense 34,562 42,048 21.7% 101,325 123,954 22.3%
Provisions and contingencies 5,604 6,538 16.7% 14,991 20,631 37.6%
Profit before tax 47,786 57,358 20.0% 126,825 156,287 23.2%
Tax 14,236 17,251 21.2% 37,744 46,435 23.0%
Profit after tax/ (loss) 27,946 33,569 20.1% 74,090 89,221 20.4%
Net profit margin (%) 22.5% 21.8%   20.9% 20.2%  
No. of shares (m)*         2,525.1  
Book value per share (Rs)         280.9  
P/BV (x)*         3.7  

* trailing 12 months earnings

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