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Monday, 19 December 2016

Banking Industry bell-weather, HDFC Bank continued with its growth momentum reporting double digit growth of 20% for both Net Interest Income & PAT. Net Interest Income, difference between interest earned and expended was at Rs. 79936 Mn in the current quarter against Rs. 66809 Mn same period previous year. Net Profit too zoomed 20% YOY at Rs. 34553 Mn in the current September quarter along with strong quarterly growth of 7%. Net Interest Margin indicating core profitability of bank’s operations was well maintained at 4.20%. Gross NPAs as a percentage of Gross Advances edged up 11 basis points YOY at 1.02%, Net NPAs as a percentage of Net advances also rose 5 basis points at 0.30% in the current September quarter. Provisions & contingencies was another star performer declining 13% QOQ and rising 10% on yearly basis in Q2 FY17. One basis point is 0.01%. Double digit growth is visible in all business segments, the highest in other banking business at 19%, followed by both treasury and wholesale at 18%. Retail segment contributes 52% of total revenue and reported 12% growth at Rs. 165131 Mn in the current quarter. CASA ratio stood at 40% improving 10 basis points QOQ. CASA deposits increased from Rs. 2013330 Mn in Q2 FY16 to Rs 2391040 Mn in current September quarter, jump of 19% YOY. Other income or non interest revenue accounting 15% of the total income of the bank rose 14% YOY and stood at Rs. 29010 Mn in current Q2 FY17. Loan book moved at a higher rate of 18% than deposits growing a tad lower at 17% YOY. Quarterly growth was also better for advances in the current September quarter at 5% whereas deposits rose sequentially at 3%. Cost income ratio of bank stood at 44.70% in the current September FY17 against 45.40% corresponding quarter previous year. With uncertainty and volatility being the hallmark of financial markets, Indian financial sector with HDFC bank is still one of the best long term bets.  The second largest private sector bank with market capitalization of Rs. 3012649.49 Mn has a CAR of 15.40% (Tier I-13.30%) and commands credibility due to growing profitability and stable asset quality in today’s volatile scenario. The bank is poised for higher growth as one of the major players in Indian banking industry. Thus we recommend BUY for the stock for medium and long term investment with a target price of Rs. 1280.

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1 comment:

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