HDFC Bank reported a 30.6 per cent jump in net profit to Rs 1,417.39 crore for the quarter ended June 30, 2012, compared to Rs 1,084.98 crore for the quarter ended June 30, 2011. The results were in line with analyst estimates.
The private sector bank was expected to report a 30 per cent YoY increase in profit after tax to Rs 1,414.20 crore for the first quarter of fiscal 2013, according to ET Now estimates.
“The bank has a consistent track record of posting a 30 per cent YoY growth in net profit and has delivered the same even in this quarter also,” Vishal Jajoo, Senior Research Analyst at Nirmal Bang Securities, said.
Jajoo recommends investors stay invested in the stock as it’s very difficult for any investor to sell a stock and then buy the same at 10 per cent lower than the sale price.
Vinayak Kanvinde, Portfolio Manager at Right Horizons, is of the view that HDFC Bank’s performance has been largely on expected lines. While total income growth has been strong, there is some stress on the cost of funds which is evident in the interest expended marginally higher than the prior year’s.
“Nevertheless, the results have been very strong and the stock price is expected to hold up at current levels. We expect to see HDFC Bank report similar strong results for the rest of the year FY13,” Kanvinde added.
Here are five reasons why analysts say HDFC Bank is a long-term buy for investors and a hedge against adverse market movement
Higher Net Interest Margins/NII
HDFC Bank reported a 22.3 per cent jump in net interest income (NII), or interest earned less interest expended, for the quarter to Rs 3,484.10 crore, driven by strong loan growth and higher net interest margin.
Net interest margin or NIM, a key gauge of profitability, stood at 4.3 per cent for the April-June period compared with 4.2 per cent in the March quarter.
“The bank aims to keep this figure in a range of 3.9-4.2 per cent in the near term,” Reuters reported.
“HDFC Bank delivered another clockwork set of numbers, with NII and bottomline coming in exactly as per our estimates. Even in this challenging environment, the bank continues to deliver 30 per cent earnings growth and superior asset quality,” Vaibhav Agrawal, VP – Banking, Research at Angel Broking, said.
Loan Growth
In a troubled business environment, the bank was able to report a healthy loan growth of 21.5 per cent. During the quarter, the bank’s loans book and total deposits expanded by 21.5 per cent and 21.97 per cent YoY to Rs 2.13 lakh crore and Rs 2.57 lakh crore.
“HDFC Bank’s loan book expansion was higher than the industry’s in Q4 FY12 and it has always maintained above industry growth around 21 per cent to 26 per cent in the past,” Rajesh Samtani, Vice President – Portfolio Management at Anand Rathi, said.
