Markets seem to be pleased with September quarter results of private sector lender HDFC Bank which were announced on Saturday. Before closing Monday’s trade at Rs 1,993, up 1.38% from the previous days close, the stock of the company had risen nearly 3% in intraday trade to Rs 2,020, the highest it has risen since October 3; the Sensex closed 0.53% down at 34,134.38 points.

The bank had reported a 20.6% rise in net profit on a year-on-year basis for the second quarter of FY19, coming in at Rs 5,006 crore. On the asset quality front, gross NPA ratio was unchanged on a sequential basis at 1.33%, but worsened on a YoY basis from 1.26% in the corresponding quarter of last fiscal. Net NPA ratio however improved slightly, narrowing to 0.40% from 0.41% in Q1 Fy19 and 0.43% last year.

Higher provisioning seemed to have restricted the bank’s profitability in Q2, with provisions jumping 23% from previous year and 11% sequentially to touch Rs 1,820 crore.

Among the components that stood out in terms of growth was fees and commission income, which came in at Rs 3,296 crore, up over 26% from last year and constituting over 82% of the bank’s other income.

Brokerages took a favourable view of the stock in view of the results. Kotak Institutional equities said in a note that the recent correction has made valuations more attractive. However, it went on to say, “Gradual increase in competition in the retail space and change in product mix raise concerns over risk-adjusted NIM (net interest margin) and its impact on asset quality in the medium term. While growth remains strong, earnings drag on the back of margin compression remains our key concern.”

A note from Elara Capital reiterated that the bank’s asset quality was robust, but raised concerns over stress in its SME and retail portfolio. “The bank witnessed a bit of stress in the SME portfolio. Retail portfolio also demonstrated some signs of stress, but it was well within HDFCB’s internal limits & framework. The bank is confident of its robust asset quality in NBFC and real estate segment,” it said.

Edelweiss in its note said that investors are likely to flock to private banks for safety given the current environment in the market, especially the banking and financials space, and that HDFC Bank was poised to gain from this move. “Given the near-to-medium term challenges in the operating environment, we expect a flight to safety in favour of private banks, particularly HDFC Bank, which will benefit in terms of fundamentals as well sentiment,” it said.

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