HDFC Bank delivered a 20 per cent growth in net profit in the September 2014 quarter over the year-ago period. This strong show came on the back of a 21.8 per cent growth in its loan book and a 23 per cent growth in core net interest income. '

HDFC Bank continues to outperform the industry credit growth, by a wide margin (6-10 per cent). The bank has put up a good show, given that overall bank credit slipped to a five-year low level of 9.7 per cent as of September. The bank’s stable margins and steady asset quality are positives too.

Set apart

But HDFC Bank’s loan growth continues to be driven by the corporate segment rather than the retail space for the fourth consecutive quarter — a trend in contrast to peers such as ICICI Bank and Axis Bank. In the latest September quarter, the bank has grown its retail loans by 17 per cent (adjusted for reclassification of loans between wholesale and retail) while corporate lending grew 21.8 per cent. The slowdown in the auto segment and the sluggishness in the commercial vehicles and construction equipment segments have impacted the bank’s retail loan growth.

Still, growth in retail loans did pick up marginally in the September quarter compared to the preceding period; retail loans had grown by 14 per cent in the June quarter. This, along with a more favourable deposit mix (higher share of low-cost deposits), has led to an improvement in net interest margins (NIM). The bank continues to deliver industry leading margins, with NIM at 4.5 per cent. HDFC Bank has always traded at a hefty premium to its peers due to its well-diversified loan book, healthy return ratios and low loan delinquency.

The bank has managed to maintain good asset quality in the September quarter too. HDFC Bank’s gross non-performing assets are amongst the lowest in the industry at 1.02 per cent of loans. Even the bank’s restructured book is just 0.1 per cent of loans, much lower than about 2.5 per cent for its peers such as ICICI Bank and Axis Bank.

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