HDFC Bank's Profit Increases - Analyst Blog

HDFC Bank’s (HDB) 2010 fiscal third quarter (ended Dec. 31, 2009) net earnings of INR8,185 million (US$175 million) were up 31.6% from the prior-year quarter, due primarily to a strong growth in net revenues, almost stable operating expenses and a decrease in provisions and contingencies (primarily comprising loan loss provisions).

HDFC Bank’s net interest income for the quarter increased 12.4% year-over-year to INR22,239 million (US$474 million), with net interest margin (NIM) at 4.3%, compared to 4.2% in the preceding quarter.

Non-interest revenues for the quarter were INR8,530 million (US$182 million), down 9.2% from the prior-year quarter. While fees and commissions increased from the prior-year quarter, the company experienced a loss of INR265 million (US$6 million) on revaluation/sale of investments in the quarter. The largest component of the non-interest revenue was fees and commissions of INR7,237 million (US$154 million), up 12.4% over the year-ago quarter.

Continued improvements in productivity were evidenced by stable operating expenses. HDFC Bank’s operating expenses for the quarter were INR14,532 million (US$310 million), down 0.5% from the year-ago quarter. Operating expenses were 47.2% of net revenues compared to 50.0% in the prior-year quarter.

Provisions and contingencies for the quarter were INR4,477 million (US$96 million), down 15.8% from INR5,318 million (US$113 million) in the prior-year quarter.

Asset quality improved, with gross non-performing assets (NPAs) to gross advances decreasing 20 basis points (bps) sequentially to 1.60%. Net NPAs also remained healthy at 0.45% of net advances, down 5 bps sequentially.

HDFC Bank’s total capital adequacy ratio (CAR) as of Dec. 31, 2009, (computed as per Basel 2 guidelines) remained strong at 18.3%, versus the regulatory minimum of 9%. Tier-I CAR was 13.8% as of Dec. 31, 2009.

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