HDFC Bank has reported a strong fourth quarter performance with 27% rise in interest income and 38% jump in net profits. The bank's better than expected performance was driven by exponential rise in other income and lower tax provisions.
Income from operations
Net interest income
Operating Profit Margin (%)
Provisions and contingencies
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (m)
Diluted Earnings per share*
During the year, the bank's total advances grew at a healthy rate of 47% to Rs 68 bn primarily due to 81% rise in retail loans (Rs 15 bn). The proportion of retail loans to total loans has increased to 23% in FY02 from 18% in FY01. The bank's continuous efforts to launch new products fueled its number of retail clients to 2.2 m from 1.4 m as on FY01. In FY02, the bank launched credit cards and added two wheeler finance to its existing range of retail loan products. The bank has also widened its reach by increasing number of branches to 171 (from 139 in FY01) and doubling its ATM network to 479 (from 207) to cater to potential retail market.
The growth pace of the bank's core advances seems to have slowed down during the fourth quarter. This is reflected from a 14% rise in interest on advances, in contrast to a healthier 32% growth witnessed in the first nine months of FY02. The bank derives major part of its revenues from wholesale banking where it caters mainly to corporate and institutional customers. Lower credit demand from this segment could have impacted its high revenue growth in the fourth quarter.
Interest on advances
Income on investments
Interest on balance with RBI
HDFC Bank's other income contribution to total income increased to 16% from 13% in FY01. This was due to its active treasury management. The segment accounted for nearly 26% of pre tax profits. Going forward, other income may not grow at the current pace as interest rates decline in FY02 was more than expected, which accorded extraordinary gains to the bank through appreciation in bond prices.
Despite the tough economic environment and challenging business conditions, the bank has maintained its asset quality at superior levels. Its net NPAs to advances ratio stood at just 0.5%, which is the lowest in the Indian banking sector. The bank has increased the provision amount by 79% in FY02, which was higher by Rs 406 m according to the US GAAP.
At the current market price of Rs 222, HDFC Bank is trading at a P/E of 21x and Price/Book value ratio of over 3x. The bank's premium valuations are due to its strong growth rates over the last few years, superior quality of its assets and better interest margins. Its higher capital adequacy ratio at 13.9% as on March 2002 would facilitate the bank in its expansion plans. However, increasing competition from both foreign and other private sector banks could trim HDFC Bank's earnings growth and consequently its valuations.
HDFC Bank declared the results for the third quarter of financial year ending March 2017 (3QFY17). The bank has reported 18% YoY and 15% YoY growth in net interest income and net profits respectively in 3QFY17.
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