HDFC Bank Q4 highlights

For the fourth quarter ended March 2019, HDFC Bank reported a 23% growth in net profits to Rs.5885 crore. This is the highest quarterly profits reported by HDFC Bank in its entire history. In fact the core net interest income (NII) grew by 23% to Rs.13,089 crore in the fourth quarter leaving the net interest margin (NIM) at a very healthy 4.4%. This is among the best in the industry among private banks. For the full year 2018-19 HDFC Bank recorded growth in credit of 24.5% with the total loan book standing at Rs.8.20 trillion. HDFC Bank has already reinforced its position as the largest private sector bank in India in terms of loans, deposits, profits and market cap too. The cost of funding of HDFC Bank has also been under control as its CASA (Current and savings accounts) deposits account for nearly 43% of its total deposit base. This focus on CASA has helped HDFC Bank to maintain its focus on low cost deposits and thus reduce the cost of funding and enhancing its NIMs. Gross NPAs of the bank fell marginally in the fourth quarter to 1.36% compared to 1.38% in the third quarter. However, these levels of NPAS are extremely healthy considering the total asset book size of the bank.

Outlook for HDFC Bank stock

The stock has been in a range of Rs.1850 to 2320 in the last one year. Normally, the bank does not give too many sharp corrections unlike many other banks. Currently, the bank is quoting close to Rs.2300 and that makes the price very close to its peak price. The bank is quoting in the range of 32-33 times the historic earnings which appears to be fair value when you consider the 18-20% growth and the high asset quality that the bank has maintained. However, the upsides from this level may be limited although we don’t rule out a spurt when the stock opens for trading on Monday.

Can we look to buy HDFC Bank on Monday?

We expect that most of the good news would be in the price by the time the stock opens for trading on Monday. HDFC Bank is a stock that has never disappointed when you buy the stock in any correction. During any year, the stock does give 1 or 2 opportunities to buy at lower levels and you must look at a level of RS.2000 or below to buy the stock. That will make it an investment with a better margin of safety.