HDFC Bank has posted a 31.6% year-on-year increase
in its net profit for the quarter ended December at Rs 818.50 crore, more or less in line with street expectations. Incidentally, this is the 27th consecutive quarterwhen the bank has posted a growth of over 30% in net profit.
Profitability was helped by a 15.8% decline in provisions and a relatively lower increase in tax expenses (up 17.3%) as compared with the growth in profit
before tax.
Provisions declined mainly because loan-loss provisions have come down due to decrease inbad loans. The percentage of net bad loans to net advances dropped to 0.5% from 0.6% in December last year.
However, interest earned declined 9.7% to Rs 4,034.81 crore.
The bank maintains that interest earned declined even on a larger balance sheet on account of a sharp decline in interest rates for both loans and deposits. Rates were in double digits in the December 2008 quarter.
Net interest income (NII), though, increased 12.3% as interest expended declined at a sharper rate (down 27.2%) than interest earned. Good growth in balance sheet and expansion in net interest margins (NIMs) also helped NII growth.
NII is the difference between interest earned and expended.
NIM is NII expressed as a percentage of average assets.
The bank's NIM increased by 10 basis points, both year on year and sequentially, to 4.3%. Hundred basis points make one percentage point.
Going forward, the bank expects margins to be in the 4-4.3% range.
The bank also performed well on the current account and savings account (CASA) ratio front. CASA deposits offer banks cheaper sources of funds as interest rates on them are relatively lower than interest rates on fixed deposits.
HDFC Bank's core CASA stood at about 49% as on December 31, 2009, compared with 40% as on December 31, 2008 and 47% as on September 30, 2009.
Other income declined 9.2% to Rs 853.01 crore. While income from fees & commissions increased, growth in non-fee income, including forex, derivatives and bonds was muted. Investments in bonds showed a loss as yields trended higher during the quarter.
Most analysts are positive on the stock, which currently trades at Rs 1,691 apiece.
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