Bank Earnings Season 1Q 2014: HDFC Bank ratchets up higher provisions, still the best picks in India Inc

The 30% PAT line growth was breached however the bank has 20% revenue growth and NII has grown to INR 70.25 Bln even as a 65% growth in provisions makes the score on the Net Income also even at 21% instead of our long observed achiever baseline of 30% for performing Indian businesses. Net Revenues are up 13% on the linked quarter as we mentioned being the “making” quarter for private Indian banks. Even as the NIMs finally return towards the new nirmal for the bank post accounting changes at 4.4% the Fee income however remains stagnant at INR 18.5 Bln. The bank has investments in two insurance subsidiaries that will be going to IPO with increased participation from Standard Life. Dividends from them are paid to bank two out of four quarters in the year

Operating expenses improved only 4.5% even as Cost Income ratios for the bank returned to good scores at 45.3% from 47% in the prior quarter

Advances have grown 20% to INR 3.12 Tln and the bank seems to have finally started a late push for international business as its international share of advances grew to 7% from 4% in the linked quarter. Deposits have grown 22% on year

Provisions seem to be on a higher portfolio size of retail and corporate assets which are almost even for the bank at a share of 52:48. The miss in profits is likely to be ignored by the market after the initial reaction on expectations

The Housing Finance NBFC, HDFC Ltd also reported INR 740 mln in investment profits and a similar amount in defered tax provisions in a report after the bank as it reported Gross Interest Income slower than the bank on stable spreads, profits growing slower than costs and a spread trend unlikely discernible because of its seasonal financial adjustments to cost computations but static in Q1 and Q2 to 2.29% implying a much higher NIMas discussed in our reports in 2012. Net Income grew to INR 18.7 Bln. The scrip is up with the gains in the sector since January 2014, its bank company growing near 30% in the bourses in the same period





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