There is a good reason why HDFC Bank shares have been consistent outperformers despite analysts' contention that the stock is fairly-valued (which is a polite way of saying the share is over-valued).
HDFC Bank, India's second largest private sector lender, on Wednesday reported a 30% year-on-year growth in fourth quarter (Jan-March) net profit to Rs 1453 crore, driven by a strong growth in loan book and fee-based income. The figure was in-line with what most analysts had estimated. Net interest income (the difference between interest earned and interest paid out) jumped 19.3% to Rs 3388 crore, driven by loan growth of 22.2% at Rs 1.95 lakh crore.
Over the last 12 months, HDFC shares have gained around 15%, compared to a 9% decline each in the Sensex and the sector benchmark Bank Nifty.
During the quarter, lower provisioning and higher other income too added to the bank’s profits. Other income, a big chunk of which comprises fees and commission, rose 19% YoY to Rs 1,492 crore, while provisions and contingencies (including specific loan loss and floating provisions of Rs 292 crore) dropped 31% YoY to Rs 298 crore.
For the full fiscal year, the bank's net profit rose at a littler higher pace by nearly 32% to Rs 5,200 crore. During the year, the bank’s loan book expanded 22% YoY to Rs 1.95 lakh crore. This growth is significantly higher than the average industry non-food credit growth of 16.80% in 2011-12.
Moreover, the retail loans surged up 34% YoY to Rs 1.07 lakh crore. Loans against commercial vehicle and construction equipment has shot up 60% YoY to Rs 13,000 crore while the share of gold loans more than doubled from Rs 1,316 crore to Rs 3,018 crore.
At the same time, the lender managed to retain its asset quality. The gross non-performing asset (NPA) ratio stood at around 1%. Since last five quarters, the bank has been reporting almost the same gross NPA ratio. Net NPA ratio too remained unchanged at 0.20%. This suggests, the asset quality has stabilized.
The bank’s deposits too grew more than 18% YoY to Rs 2.47 lakh crore as compared to 13% YoY growth for the entire industry in 2011-12. The share of current account and savings account (CASA) to total deposits stood at 48.4%.