HDFC Bank’s (HDB) fiscal fourth quarter 2011 (ended March 31, 2011) net profit of INR11.15 billion (US$0.25 billion), saw an impressive 33.2% increase over the prior-year quarter. Results improved primarily on strong growth in net revenue and a minimal decline in provisions and contingencies (primarily comprising loan loss provisions), partially offset by higher operating expenses.
For fiscal 2011, net profit came in at INR39.26 billion (US$0.86 billion), up 33.2% from the previous year.
HDFC Bank’s net interest income for the quarter shot up 20.8% year over year to INR28.40 billion (US$0.62 billion). The increase was primarily driven by a 27.1% growth in loans.
Quarter in Detail
Non-interest revenues summed up to INR12.56 billion (US$0.28 billion), up 32.1% from the prior-year quarter. This was primarily led by the 23.2% increase in fees and commissions. Foreign exchange & derivative revenues also improved from the year-ago quarter. Furthermore, the company experienced a year-over-year profit on revaluation/sale of investments in the quarter.
HDFC Bank’s operating expenses totaled INR19.98 billion (US$0.44 billion), up 24.3% from the year-ago quarter. The cost-to-income ratio remained almost unchanged from the prior-year quarter at 48.8%. Provisions and contingencies were INR4,313 million (US$94.77 million), down 2.0% year over year.
HDFC Bank’s total deposits saw a sharp 24.6% increase from the prior-year quarter to INR2.1 trillion (US$0.05 trillion). Net advances grew 27.1% over March 31, 2010 to INR1.6 trillion (US$0.03 trillion).
Asset Quality
Asset quality improved with gross non-performing assets (NPAs) to gross advances coming at 1.1%, down 30 basis points (bps) year over year. Net NPAs also remained healthy at 0.2% of net advances, down 10 bps from the year-ago quarter.
Capital Ratios
HDFC Bank’s total capital adequacy ratio (CAR) as of March 31, 2011 (computed as per Basel II guidelines) remained strong at 16.2%, higher than the regulatory minimum of 9.0%, but down from 17.4% recorded at March 31, 2010. Tier-I CAR was 12.2% as of March 31, 2011.
HDFC Bank has broadened its reach, with a distribution network of 1,986 branches and 5,471 ATMs in 996 cities at March 31, 2011. As of March 31, 2010, the company had 1,725 branches and 4,232 ATMs in 779 cities. As of March 31, 2011, the company’s total customer base was 21.9 million.
Our Viewpoint
We expect continued synergies from the company’s exposure to the fast-growing Indian retail credit sector. Continued branch expansion will also drive growth ahead in deposits. Nevertheless, increasing competition in the retail space with the re-entry of peers is a future concern. Also, slowing loan demand is expected to keep the bottom line under pressure.
HDFC Bank currently retains a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating.
HDFC Bank’s close competitor — ICICI Bank Limited (IBN) — is expected to report fourth quarter and full-year results on May 31, 2011.
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