has followed the footsteps of its parent to put up a consistent show in the September 2011 quarter. Notwithstanding slight moderation in margins, the bank posted a profit growth of 31.5 per cent, buoyed by strong business growth.

Even as net interest income and fee income grew by 16.6 per cent and 15.6 per cent , respectively, year-on-year, profit growth was aided by a fall in provisioning. Higher forex and derivative revenues and lower losses from the sale of investments also helped profit growth. Profits were above Bloomberg consensus estimates leading to the stock gaining 3.2 per cent at close on Wednesday.

Healthy loan book

For the second successive quarter, the loan book has shown a healthy pace of growth. After moving up by 10 per cent on a quarter-on-quarter basis in the April-June 2011 period, it has currently grown by 7.4 per cent. This has had its effect on the borrowing side, with the proportion of low-cost deposits falling from 51 per cent in March 2011 to 47.3 per cent in the three months ended September 2011.

This has also partly led to a fall in net interest margins (NIM) of HDFC Bank. NIM fell from 4.2 per cent to 4.1 per cent sequentially. Besides, a fall in credit-deposit ratio from 83 per cent to 81 per cent played its part on trimming the NIM.

However, with more loans than deposits coming up for maturity over the next six months (according to the bank's annual report), future loans can be priced at a higher rate which may help sustain margins at current levels.

The non-performing assets ratio continues to surprise positively.The gross NPA at 1 per cent, fell from 1.16 per cent a year ago. Additionally, a standard restructured asset ratio of around 0.1 per cent positions HDFC Bank amongst the best banks in terms of asset quality.

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