X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
HDFC Bank: Consistency in performance - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 10, 2003

    HDFC Bank: Consistency in performance

    HDFC Bank continues to report strong growth in its income as well as earnings. For 2QFY04, growth numbers are more or less in line with the trend in the last few quarters. While the topline has risen by a strong 34%, the bottomline has increased by a similar 31% on a YoY basis. A strong topline growth combined with a relatively lower rise in expenses has resulted in net interest margin improvement and consequently, operating margins. It must be noted that the strong performance in the September quarter has been achieved despite a significant fall in other income.

    (Rs m) 2QFY03 2QFY04 Change 1HFY03 1HFY04 Change
    Income from operations 4,796 6,402 33.5% 9,581 12,148 26.8%
    Other Income 1,276 863 -32.4% 2,037 2,185 7.3%
    Interest expense 2,905 3,024 4.1% 5,811 6,018 3.6%
    Net interest income 1,892 3,378 78.6% 3,769 6,129 62.6%
    Other expenses 1,391 1,947 40.0% 2,582 3,741 44.9%
    Operating Profit 501 1,431 185.7% 1,187 2,388 101.2%
    Operating Profit Margin (%) 10.4% 22.3%   12.4% 19.7%  
    Provisions and contingencies 434 638 47.0% 730 1,339 83.5%
    Profit before Tax 1,344 1,656 23.2% 2,494 3,234 29.7%
    Tax 447 485 8.4% 773 989 28.0%
    Profit after Tax/(Loss) 897 1,171 30.6% 1,721 2,244 30.4%
    Net profit margin (%) 18.7% 18.3%   18.0% 18.5%  
    No. of Shares (m) 281.9 283.5   281.9 283.5  
    Diluted earnings per share (Rs)* 12.7 16.5   12.1 15.8  
    P/E ratio (x)         19.8  
    *(annualised)            

    The bank has reported a 44% growth in customer assets (including advances, corporate bonds) and a 29% growth in deposits in the September quarter on a YoY basis. HDFC Bank is one of the largest players in the retail credit segment. In the September quarter, retail advances have grown by 131% and now constitute 32% of total advances (23% last year). In our research model, we have assumed an advances growth rate of 45% in FY04 with net interest margins at 3.2%.

    HDFC Bank has also benefited from growth in low cost retail deposits (retail savings deposits grew by 61% in the September quarter on a YoY basis). The strong growth in the same over the last few years has ensured that interest costs are low, enabling it to improve its net interest margins. Net interest margins currently stands at 3.6% compared to 3.3% in FY03.

    While the bank has further expanded the scale of operations (253 branches currently compared to 231 in the same period last year), it has managed to keep operating costs under check. This is evident from the strong improvement in operating margins. Going forward, as the pace of expansion slows down, we are likely to see benefits accruing from increased productivity thus leading to improvement in operating margins.

    While the bank continues to maintain its growth momentum, it has ensured that its asset quality is healthy. Net NPA to advances ratio has been maintained at a 0.4%, which is one of the lowest in the industry. We would also like to point out that the bank's strong bottomline performance has been maintained despite a significant fall in other income. This arose due to losses booked on investments in the September quarter, as against profits in the same period last year. While core fee based income has risen, fee income on forex and derivatives transactions has declined.

    At the current market price of Rs 314, HDFC Bank is trading at a price to book multiple of 3.6x. While the bank has been able to maintain consistent growth momentum over the years, at the current juncture, valuation of this bank is the highest in the Indian banking sector. Considering this, investors need to look more carefully at the potential of the bank and ascertain whether such high valuations are justified in the face of rising competition.

     

     

    Equitymaster requests your view! Post a comment on "HDFC Bank: Consistency in performance". Click here!

      
     

    More Views on News

    HDFC Bank: Asset Quality Deteriorates due to Farm Loan Waiver (Quarterly Results Update - Detailed)

    Jul 25, 2017

    Asset quality was under pressure on account of farm loan waivers. Despite the higher provisioning, the company reported a healthy profit growth of 20%.

    HDFC Bank: Solid Performance Amidst a Difficult Environment (Quarterly Results Update - Detailed)

    May 3, 2017

    Personal Loans and Credit Cards help HDFC bank report a robust set of numbers over the fourth quarter and for the financial year 2017.

    HDFC Bank: Growth Stumbles Post Demonetisation (Quarterly Results Update - Detailed)

    Jan 30, 2017

    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.

    IDFC Bank: Strong Trading Income Shields Credit Slowdown (Quarterly Results Update - Detailed)

    Aug 10, 2017

    IDFC Bank is taking steps to address contracting NIMs and successfully transition in to a retail bank.

    ICICI Bank: Loan Slippages Trending Downwards (Quarterly Results Update - Detailed)

    Aug 10, 2017

    Asset quality will be the key thing to watch out for going forward.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    HDFC BANK SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK HDFC BANK

    • Track your investment in HDFC BANK with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    HDFC BANK - WELLS FARGO COMPARISON

    Compare Company With Charts

    COMPARE HDFC BANK WITH

    MARKET STATS