HDFC Bank's third quarter earnings matched analysts' expectations on Monday. Profit increased 20 percent year-on-year to Rs 3,357 crore during the quarter, supported by operating profit, net interest income and other income despite higher tax cost and provisions.
In an interview with CNBC-TV18's Ekta Batra, Vaibhav Agrawal of Angel Broking, Kunal Shah of Edelweiss, Gaurang Shah of Geojit BNP Paribas and banking analyst Hemindra Hazari shared their readings of HDFC Bank's third quarter earnings.
Below is the transcript of the interview on CNBC-TV18.
Ekta: Rs 7,070 crore is what it looks like on the net interest income (NII) and the profit figure is also just at around Rs 3,357 crore. So, that equals to over 20 percent growth rate for NII and 20 percent growth rate for the profit figure? Agrawal: The NII looks 1-2 percent higher than what we were expecting. Bottomline is again a clockwork sort of a number and what is encouraging is and what really highlights the strength of their business model that again the gross and net non-performing asset (NPA) percentage is not materially higher than the last quarter whereas for other banks, there has been much more pain. So, overall, a very resilient set of numbers. Ekta: Have the net interest margins (NIMs) improved by 10 basis points if indeed it has come in at 4.3 percent? Agrawal: Yes, that is right. Last quarter it was 4.2 percent so I think even on that front it is a pretty good margin. Ekta: Based on the gross NPA that they have reported on an absolute basis, it has come in at Rs 4,255 crore which equals to an 11 percent rise on a sequential basis. If you see in the past couple of quarters it has been a 5 percent rise or a 6 percent rise or it has been flat. Would you be worried by an 11 percent quarter-on-quarter (Q-o-Q) rise in the gross NPA say compared to a 4-5 percent rise in the last quarter? Agrawal: In the context of the overall expectations for the sector, I think these are still acceptable numbers on the gross NPA. It would be interesting to know what was the banks situation for the accounts which the RBI had given to banks, etc and what is the outlook. I think overall an 11 percent increase is something that should be quite comfortable.
Ekta: What is your take on the numbers that HDFC Bank has reported especially in terms of the asset quality? Kunal Shah: On asset quality, when you look at it, there has been six basis points increase in gross non-performing loan (GNPLs) and almost 4 basis points increase in net NPLs. So, to that extent I think it is pretty much inline with expectations in terms of overall provisioning as well. So, we were also expecting somewhere Rs 650 crore odd provisioning for this quarter provided that they had almost Rs 1,600 crore of floating provision. So, broadly including the asset quality, the overall numbers have been pretty much inline with expectations with PAT also growing at 20 percent and NII growth also coming at 23-24 percent. So, broadly it has been very much inline with our expectations. Ekta: You would not be worried about an 11 percent rise on an absolute basis in the gross NPL this quarter and a 21 percent rise on the net NPLs? Kunal Shah: Overall when you look at it, it is sub 1 percent level, so not too much of a worry and I think we know that RBI has given out the least of a few corporate accounts wherein across these segments you will see some kind of inch up in GNPLs for almost all the banks. So, in terms of what they have reported, it is still at 6 basis points kind of an increase.
Ekta: What is your view on HDFC Bank’s numbers this quarter? Hazari: HDFC Bank rarely disappoints the street and going by that trend I think they have been able to meet analyst expectations, so, that is no surprise that even on profits as well as on asset quality they have met analyst expectations. Now, this is truly commendable given the macroeconomic environment they are in because I am expecting even some banks to report losses in this quarter. So, given such an environment, I think these results are exceedingly good. Ekta: Based on what they have reported in terms of the numbers what would you assume in terms of the asset quality details? Hazari: The asset quality at least from the gross NPAs that they have reported has been under 1 percent. So, you would expect that given the banks reputation, I do not see any significant deterioration in its asset quality. However, this has been one of those banks which has got out of problem loans at an earlier stage and was willing to take the pain upfront as they did with Essar Steel account. So, I think one should not see any significant issue on the asset quality.
Ekta: What is your take on the HDFC Bank numbers? Gaurang Shah: I would rather put it this way. I think it is a consistent performer and inline with what more or less our estimates barring minor blips on the net and the gross NPA front. As a disclosure we do have a positive coverage and we are maintaining earlier numbers and depending on that we had kept the target of somewhere close to about Rs 1,200-1,250. Post these numbers, we might just go back to our work tables and revise the target in case it warrants upwards. However, I would say a steady run rate and a steady performance.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
