The stock slumped yesterday by almost 2.5% as the market did not take kindly to the rise in the Bank’s bad loans though bottomline rose. The bank ended Q1FY14 with a 30% (YoY) rise in net profit at Rs.1844 crore. There was a small 10 bps rise in net bad loan ratio at 0.3% and this was on account of slippages in commercial vehicle and construction equipment loans. The bank has stated that a few corporate loan accounts also became NPA during the quarter. Though the rise in net profit, which came in for the 55^th consecutive quarter, this was very much expected but for a strong bank like HDFC Bank to report a rise in bad loan shocked the market.  Yet, the asset quality of the bank remains healthy - Gross NPA were at 1% of gross advances as on June 30, 2013, as against 1.0% of gross advances as on June 30, 2012. Net NPA was at 0.3% of net advances. Total restructured loans (including applications received and under process for restructuring) were at 0.2% of gross advances as of June 30, 2013 as against 0.3% as of June 30, 2012. Total floating provisions stood at Rs.1,865 crores v/s Rs.1680 crore (YoY). The Bank’s total Capital Adequacy Ratio (CAR) as at June 30, 2013 (computed as per Basel III guidelines) stood at 15.5% as against a regulatory requirement of 9%.

Net interest income (difference between interest income and interest expense) was Rs 4,419 crore, up 21%. What also came in as a pleasant surprise was the NIM, which was widely expected to be around 4.1 to 4.2% and it came in at 4.6% v/s 4.3% (YoY).  Total income of the bank rose to Rs 11,588.56 crore v/s Rs 9,536.9 crore. The cost-to-income - ratio for the quarter was at 47.9% v/s 49.5% (YoY). Advances grew 21% and deposits rose 18%. The CASA ratio as at June 30, 2013 was at 44.7%. Looking ahead, the bank does not foresee any increase in the bad loans and hopes to maintain it at current levels and NIM is also expected to be maintained at same levels. This is a blue chip stock and must for long term portfolios.