HDFC Bank bank share

HDFC Bank Ltd (updated - 20 Jan 2012)
Stellar operations during the quarter to December 2011 at HDFC Bank reflected in a 31% rise in earnings per share for India’s second-largest private lender, in line with expectations and driven by strong growth in treasury and the retail segment.

The bank’s stronger focus on retail lending rather than wholesale is expected to continue for the March 2012 quarter as well. Assuming that the economy sustains a growth of 6.5-7%, HDFC Bank should be in a position to comfortably achieve a loan growth of close to 18-20% by the end of this fiscal, outperforming its peers. That should translate into an annual earnings growth of 25-30% for the bank’s shareholders in a challenging environment for loan growth.

A series of interest rate hikes through 2011 has made borrowings expensive for industry, and putting the brakes on capital expenditure across sectors. But despite few new green-field projects, HDFC Bank’s gross advances grew by 22% which is considerably higher than the industry average of about 16%. The growth came from the retail segment where margins are higher than corporate lending.

Retail lending contributed to over half of the loan book and is expected to drive growth in the coming quarters as well. Within the segment, home loans witnessed the fastest growth followed by commercial vehicles. The bank’s continued expansion paid off well, with savings account deposits rising 17%. During the quarter, the bank opened 421 new branches which took its operating expenses up by 6%. Overall, its net interest income, which is the interest it earns after making interest payments, rose 12% to Rs 3,116 crore - slightly below expectations.

Its net interest margin stood firm at 4.1%, which is within its comfort zone of 3.9-4.2% while its non-performing assets as a percentage of net advances remained stable at 0.2%.

Return on assets has improved by 10 basis points, but this is still 110 basis points lower than last year’s return of 1.6%. Also, the 10-basis-points rise in its cost of funds is a bit of a concern.

Following the announcement of its results, shares of HDFC Bank rose 1% to close at Rs 485 which is 4.4 times its book value.
Source - Economic Times

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