Is it beneficial to buy HDFC Bank shares?

Housing Development Finance Corporation Limited (HDFC) Bank is the country’s most valuable private sector bank. Headquartered in Mumbai, it has a total of 4,804 branches and 12,808 ATMs across India. The bank has a strong presence in the international markets and has established itself in Hong Kong, Dubai, and Bahrain.

It offers an extensive range of financial products including insurances, loans, investment solutions, and cards (debit, credit, forex). Moreover, it caters to an array of segments including personal, business, corporate, and NRI.

In 2017, the bank won the Best Domestic Bank Award in Asiamoney India Banking Award. Incorporated in 1994, HDFC Bank has been a reputed name in the market as it has consistently reported a strong growth in the majority of the quarters. The bank is among the top three players in auto loans, personal loans, cash management, among others.

Financial Performance of HDFC Bank

Earlier in January this year, HDFC Bank’s market capitalisation crossed Rs.5 lakh crore. It became the third Indian company after Reliance Industries Limited (RIL) and Tata Consultancy Services Limited (TCS) to enter Rs.5 lakh crore market capitalisation club. As on 21 September 2018, the market capitalisation of HDFC Bank stood at around Rs.5.25 lakh crore. In the Q1 FY 2018-19, HDFC Bank recorded an increase of 18.8% in the total income that stood at Rs.26,367 crore. The net interest income for the quarter was at Rs.10,813.6 crore and registered an increase of 15.4% YoY (year-over-year). For the Q1, HDFC Bank recorded a net profit of Rs.4,601.4 crore as compared to Rs.3,893.8 crore for the same period in the previous year. The CASA ratio of the bank stood at 42%.

HDFC Bank Asset Quality

The Gross Non Performing Assets (NPA) ratio was 1.33% while net NPA ratio was 0.41%, as of 30 June 2018. The bank’s floating provision stood at Rs.1,451 crore while the total provisions were 118% of the gross non-performing loans. The total provisions comprise specific provisions, general provisions and floating provisions. HDFC Bank’s total deposits registered an increase of 20% YoY and stood at Rs. 8,05,785 crore. Total advances stood at Rs.7,08,649 crore and recorded an increase of 22% YoY. The bank’s capital adequacy was at 14.6%.

For the entire FY 2017-18, ended 31 March 2018, HDFC Bank earned a total income of Rs.95,461.7 crore while the net revenues stood at Rs. 55,315.2 crore, up by 21.7% YoY. The bank’s net profit registered a growth of 20.2% YoY and stood at Rs.17,486.8 crore. The company’s Board recommended a dividend of Rs.13 per equity share of Rs.2 for the FY 2017-18. It was up from Rs.11 per equity share of Rs.2 for the previous year. The bank’s gross non-performing assets were at 1.30% as against 1.05% as on 31 March 2017. Meanwhile, HDFC Bank’s net non-performing assets stood at 0.4% of net advances.

HDFC Bank Stock Trends

At the beginning of January 2018, the HDFC bank share price stood at Rs.1,872 following which it crossed the Rs.2,000 mark in the month of February. The price of the stock was pretty stable till the month of June following which, it jumped even further. In July 2018, HDFC bank raised Rs.8,500 crore by issuing over 3.9 crore shares on preferential basis to its parent HDFC. As a result, the stock of the bank hit an all-time high Rs.2,219 in July. As on 25 September 2018, the price of HDFC Bank stock stood at Rs.1,943.

The HDFC Bank share has recorded an increase of 20% in the past one year. It has surpassed the sector index and BSE Bankex. The basic earnings per share (EPS) for the Q1 FY 2018-19 was Rs.17.7, as against an EPS of Rs.15.2 reported for the Q1 FY 2017-18.

Should you invest in HDFC Bank shares?

HDFC Bank has consistently delivered strong financial performance in most of the recent quarters even in case of a challenging environment. It has registered a steady 20% profit growth for the recent quarters. The bank’s immunity to the bad loans crisis has helped it in terms of the stability of the stock. Moreover, HDFC Bank has reported a bad loan ratio below 1% which is the lowest among the other Indian lenders. For all the aforementioned reasons, it is beneficial to buy the HDFC stock for a long term. Even though the stock price more than Rs.2,000, it could help you garner sizeable returns in the longer run.However, it is strongly advised to conduct your own research before investing your hard-earned money in the stock. You can refer to blogs and websites like BankBazaar.com that offer deep insights on several top-performing stocks like HDFC Bank, ICICI Bank, Yes Bank etc.