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HDFC Bank: Asset Quality Intact - Views on News from Equitymaster
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HDFC Bank: Asset Quality Intact
Oct 26, 2016

HDFC Bank declared the results for the second quarter of financial year ending March 2017 (2QFY17). The bank has reported 20% YoY and 20% YoY growth in net interest income and net profits respectively in 2QFY17. Here is our analysis of the results.

Performance summary
  • Net interest income grows 19.6% YoY in 2QFY17 on the back of 18.1% YoY growth in advances.
  • NIMs continue to remain stable at 4.2%.
  • Cost to income ratio improved by 80 basis points to 44.7%.
  • Net NPA to advances were flat at 0.3% in 2QFY17, while the gross NPAs remained flat at 1.02% of advances.
  • Capital adequacy ratio (CAR) comfortable at 15.4%, Tier I CAR at 13.3% at the end of September 2016.

    Rs (m) 2QFY16 2QFY17 Change 1HFY16 2HFY17 Change
    Interest income 147,725 170,699 15.6% 288,136 335,860 16.6%
    Interest expense 80,916 90,764 12.2% 157,439 178,109 13.1%
    Net Interest Income 66,809 79,936 19.6% 130,697 157,750 20.7%
    Net interest margin (%) 4.2% 4.2%
    Other Income 25,518 29,010 13.7% 50,137 57,076 13.8%
    Other Expense 41,898 48,700 16.2% 81,906 96,389 17.7%
    Provisions and contingencies 6,813 7,490 9.9% 14,093 16,157 14.6%
    Profit before tax 50,429 60,245 19.5% 98,928 118,437 19.7%
    Tax 14,922 18,202 22.0% 29,183 35,338 21.1%
    Profit after tax/ (loss) 28,695 34,553 20.4% 55,652 66,942 20.3%
    Net profit margin (%) 19.4% 20.2% 19.3% 19.9%
    No. of shares (m)* 2545.7
    Book value per share (Rs) 316.5
    P/BV (x)* 4.0

    *Book value as on 30th September 2016

  • HDFC Bank continued to report good numbers in 2QFY17 in its retail loan segment which grew at 21.7%. The fastest growing segments were Auto, personal loans.
  • Deposit growth for HDFC Bank at 16.7% YoY remained healthy while the overall balance sheet grew by 19.5% YoY. CASA (low cost deposits) as a share of total deposits stood at 40.4% in 2QFY17.

    CASA numbers remain strong
    (Rs m) 2QFY16 % of total 2QFY17 % of total Change
    Advances 4,185,410 4,944,180 18.1%
    Retail 2,193,802 52.4% 2,669,857 54.0% 21.7%
    Corporate 1,991,608 47.6% 2,274,323 46.0% 14.2%
    Deposits 5,069,090 5,917,310 16.7%
    CASA 2,013,397 39.7% 2,391,040 40.4% 18.8%
    Term deposits 3,055,693 60.3% 3,526,270 59.6% 15.4%
    Credit deposit ratio 82.6% 83.6%
  • HDFC Bank saw a stable NPA numbers. Gross NPAs were at 1.02% while net NPAs at 0.3% of advances respectively, the provisions and contingencies went up almost 10% YoY.
  • As of March 2016, the bank's distribution network was at 4,548 branches and 12,016 ATMs in 2,596 cities. 54% of the bank's branches are now in semi urban and rural areas.
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