True to its consistent track record, HDFC Bank reported a 32.77% growth in net profit for the third quarter ended December 31, 2019. It is surprising that the bank has continued to sustain these high levels of growth after so many quarters of consistency. The numbers were essentially buoyed by higher net interest income and other income. Net profits came in at Rs.7416 crore compared to Rs.5586 crore on a YOY basis. The actual net profits were nearly 7% higher than the Bloomberg consensus estimates.

The big driver of growth in profits was the 12.69% growth in the Net interest income (NII). This NII represents the difference between interest earned on loans and the interest actually paid on deposits. The NII for the December 2019 quarter stood at Rs.14,173 crore. Core fee income rose 35.53% to Rs.6669 crore for the same period. There was a marginal increase in the gross NPAs for the December quarter from 1.38% to 1.42%; as a percentage of total advances. Provisions during the quarter increased 37.62% to Rs.3044 crore as the bank adopted a more conservative policy on provisioning. Net NPAs were still at very conservative levels of 0.48% against 0.42% the sequentially previous quarter.

For a long time, HDFC Bank has been like a gold standard among the blue chips. With its leadership among the private banks in growth and total business, the bank has traditionally supported record valuations due to its consistency and control over NPA levels. For any conservative investor looking to earn 15-20% annualized returns on a stock over 4-5 years, HDFC Bank will be an automatic choice.