HDFC Bank - Q2FY14 Result Review - Angel Broking

HDFC bank delivered yet another quarter of consistent earnings performance, with a growth of 27% yoy to Rs. 1,982cr (at the PBT level, growth was higher at 32% yoy). On the operating front, the NII grew by 15% yoy to Rs. 4,476cr, as the bank moderated the pace of its advance growth to 16% yoy. Net Interest margins for the bank declined by 25bp qoq to 4.3%, which was largely on account of higher funding costs during the quarter. The bank opted for providing the entire Rs. 135cr MTM loss during the quarter (ignoring RBI relaxation of spreading over the MTM loss over balance part of the year), still non-interest income for the bank grew strongly by 25% yoy (partly aided by one-off forex income of roughly Rs. 60cr).

Overall, operating income grew by 18% yoy and pre-provisioning profits grew by 27% yoy. On the asset quality front, the absolute gross and net NPA levels for the bank, increased by 8% and 11% qoq, respectively, which given the context of current macro challenges, appears to be a moderate increase. In light of current macro environment, the current earnings trajectory of 27% yoy is impressive and much better than other large private peers, which in our view, justifies a premium valuation multiple. Hence, we recommend a Buy rating on the stock.

Source : Equity Bulls

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