HDFC Bank Ltd’s earnings performance has been synonymous with the word consistent. The bank’s September quarter financial results underline that sentiment.
As usual, the private bank’s net profit growth was in the double digits and remains above the 20% level; rising 20.42% on a year-on-year (y-o-y) basis for the September quarter to Rs3,455.33 crore.
The surge was aided by higher net interest income and other income. Its net profit rose 20.14% in the June quarter of this fiscal and 20.2% in the March quarter of the previous fiscal. That’s how steady HDFC Bank’s profit growth has been.
The net profit figure beats estimates of 22 Bloomberg analysts of Rs3,470.40 crore.
The trend is similar for net interest margins (NIMs), which have been above the 4% level for the past many quarters. For the September quarter, NIMs stood at 4.2%. In Q1FY17, NIMs were at 4.4% and 4.3% in Q4FY16.
No wonder the bank enjoys a price-to-book valuation of 3.78 on estimated book value per share for FY17, well above its peers.
The bank’s asset quality remained stable and net interest income (NII) increased 19.6% from a year earlier to Rs7,991 crore, but it missed the 20% mark. HDFC Bank’s NII has been above 20% since the September 2014 quarter.
Meanwhile, a bit of a disappointment, according to some analysts, was a moderation in HDFC Bank’s loan growth, which rose 18.1% in Q2FY17, lower than the 23.2% reported in Q1FY17. However, they don’t see this as an area of much concern and expect loan growth to pick up again in the third quarter because of the festival season.
Finally, while HDFC Bank has been an outstanding performer, its valuations are very rich.
So, as the stress on the balance sheets of other banks begins to ease, market participants are likely to bet on them rather than HDFC Bank. So, one can expect HDFC Bank to slightly underperform its peers.