HDFC Bank (HDB) Earnings Rise 32% Year over Year

Lost in the hubbub of earnings for one of our top financial oligarchs JPMorgan (JPM) is the earning's of India's 2nd largest (private) bank, HDFC Bank (HDB).  We continue to see excellent earnings growth here, so fundamentally I have no complaints.  I just have a very hard time justifying the valuation at these levels... than again 30% growth is not something we usually associate with a bank here in the States.  Nor do we associate banks with an actual regulator who does their job - that alone is worth a premium. [Dec 28, 2008: NYT - How India Avoided the Crisis]  (of course if you believe the US/UK dogma, the Indian regulation has caused all the "talent" to move out of the country)

Looking at a chart, after a relentless run in 2009 (about 80% gain) the stock has been consolidating the past few months. One point of concern is the "lower high" last week versus the early December 09 high.  Something to keep an eye out on.. as we want stocks to make new intermediate highs through time.  Personally I am hoping some sort of correction ensues and this stock can drop 25-30% where we can build a more hefty position. A move down to the 200 day moving average under $110 would be nice...

Via Reuters:

• HDFC Bank reported a 32 percent rise in quarterly profit as the No. 2 Indian private sector lender rode robust loan growth, and analysts said they expected the bank to maintain the pace in the coming quarter.  Demand for bank loans in India has been sluggish, but the New York-listed HDFC Bank (HDB) continues to outperform because of its focus on retail loans.
• Bad debt provisions fell 6 percent in the December quarter from a year earlier, while loans grew 21 percent, the bank said.  "Sequentially we have grown 5%. Corporate advances have grown 30% while retail was at 11%" Paresh Sukthankar, ED, HDFC Bank.
• The bank's net profit rose to 8.19 billion rupees ($179 million) in the December quarter from 6.22 billion a year earlier, as its net interest margin improved to 4.3 percent from 4.2 percent.
• "We are bullish on HDFC Bank. We expect auto and mortgage loans to be the key segments to drive the loan growth," said a banking analyst at brokerage India Infoline Ltd.
• Angel Broking analyst Vaibhav Agrawal said HDFC Bank's access to cheap funds -- 49 percent of the bank's deposits were in current and savings accounts that cost zero to 3.5 percent -- would continue to help its earnings.
• "We have gained market share in almost every retail loan product and retail makes up half our book. Even in wholesale, our diversified portfolio has helped growth," Sukthankar said.
• Gross non-performing loans narrowed to 1.6 percent of the bank’s total advances as of Dec. 31, from 1.9 percent a year earlier.
• Indian banks were mostly insulated from the direct impact of the global credit crisis, but the world downturn hit Asia's third-largest economy harder than expected leading to a sharp slowdown in credit growth in the current financial year.
• While the Reserve Bank of India has projected an 18 percent growth in loans for 2009/10, banks say they may fall short and end the fiscal year at around 15-16 percent credit growth.
• State Bank of India, the country's top lender, and the No. 2 ICICI Bank (IBN) are expected to report a drop in quarterly earnings later this month, largely due to treasury losses and higher provisioning norms, analysts said.

[Oct 15, 2009: HDFC Bank's Earnings Propel Upward 30%]

Long HDFC Bank in fund; no personal position