HDFC Bank (HDFCBANK) Q4 06/07 earnings summary

Executive summary

• FY2006-07 total income was Rs 8,405.3 crore and net profit Rs 1,141.5 crore, versus Rs 5,599.3 crore and Rs 870.8 crore in FY2005-06.

• Growth was supported by higher net interest income, an expanded retail franchise and wholesale banking activity; tighter liquidity and rising rates increased funding costs and investment-market pressure.

Financial highlights

• Net revenues rose 42.4% to Rs 5,225.8 crore; net interest income increased 45.7%, supported by 36.6% growth in average balance-sheet size and NIM improvement from 4.0% to 4.3%.

• Other income increased 34.9% to Rs 1,516.2 crore, led by fees, commissions, foreign exchange and derivatives; operating expenses rose to Rs 2,420.8 crore from Rs 1,691.1 crore.

• Net profit grew 31.1% to Rs 1,141.5 crore; basic EPS was Rs 36.29 versus Rs 27.92 and diluted EPS Rs 36.06 versus Rs 26.33.

• Balance-sheet size rose 24.1% to Rs 91,236 crore; deposits were Rs 68,298 crore and advances Rs 46,945 crore at March 31, 2007.

Outlook and guidance

• Strategy targets disciplined growth, stronger customer franchises, technology-led service and cost control, sustained asset quality, lower-cost funding and healthy earnings growth with low volatility.

• Proposed additional equity issuance of US$1 billion (~Rs 4,200 crore) to support growth, Basel II and changing capital-market exposure requirements; part of the issue was intended to maintain HDFC Group ownership near 23% of enhanced capital.

• Planned further rural and semi-urban outreach, including additional branches focused on Self Help Group lending after a successful pilot in Tamil Nadu.