HDFC Bank keeps up the good show in Q2

HDFC Bank's second quarter results reaffirmed its status as the most stable bank in India. The bank's net profit during the September 2008 quarter was close to its longterm average growth of little over 30%. The bank's net profit was up by a healthy 29% during the quarter compared to the combined profit of HDFC Bank and Centurion Bank of Punjab (CBoP) in the September 2007 quarter. The slip in earnings is minimal given the tough banking environment.
    The net interest income (the difference between interest income and interest expense) grew by 40% on a consolidated basis, which is less than 50% average growth recorded in the four quarters of 2007 on a standalone basis. To this extent, the slowdown is taking a toll on HDFC Bank. However, it is on par with analyst expectations, most of whom were expecting the bank to remain on its growth trajectory.
    The reason why the bank's financials are firm and it is still the most stable bank of the country is that it has kept its performance unchanged on certain key parameters. For instance, net interest margin improved to 4.2% in the second quarter of financial year 2008-2009 as compared to 4.1% in the first quarter of financial year 2008-2009. This indicates that the bank has been able to pass on the rise in interest rate to its borrowers. The absolute net non-performing assets have gone up, while in percentage terms it stood at 0.57% of net advances, one of the best among peers. This indicates that the quality of the loan book has remained intact even after merger with CBoP.
    The bank is going strong on the expansion programme as the number of branches grew to 1,412 in September 2008 from 1,229 in June 2008 quarter. This shows that the bank considers the current environment only a minor aberration in the longterm growth story.
karan.sehgal@timesgroup.com