HDFC Bank’s April-June quarterly results were impressive. Some of the precautionary measures taken by the Bank in the long run are the most notable part of the performance report.
HDFC Bank’s profit grew by 19.5 per cent in the last quarter. The bank had posted a net profit of Rs.6,658.62 crore in the previous quarter. It was Rs.5,568 crore during the same period last year. The bank’s net interest income rose 18 per cent. Net interest income stood at Rs.11,665 crore. It was Rs.13,294 crore during the same period last year.
The total non-performing assets of the bank have increased. Non-performing assets (NPAs) stood at Rs.13,773 crore in the previous quarter. It was Rs.11,769 crore during the same period last year. The market had expected an increase in non-performing assets due to the possibility of lower loan repayments due to COVID-19.
At the same time, it is noteworthy that more money has been allocated in the provision item in view of the possibility of increasing non-performing assets in the future. They have made more than the required amount as per the rules laid down by the Reserve Bank. They have increased their reserves as a precautionary measure in the event of an unforeseen default on loan repayments after the moratorium period. COVID-19 fears that the change in the nature of consumers and the decline in financial transactions are in anticipation of such a situation. It is a rare step for banks to make such a move in anticipation of a possible setback in business.
HDFC Bank is displaying such corporate decency when there is a tendency on the part of many banks to add profits to the balance sheet without even following the rules set by the Reserve Bank. Maintaining clarity and transparency about the future of the business in this way shows a high level of corporate management.
It is with this feature that prompts investors to place a higher value on HDFC Bank. It was through these separate steps that HDFC Bank gained the trust of investors. The value of that trust comes from the stock market. HDFC Bank’s share price is currently 3.91 times its book value.
The quality of corporate management and the uncompromising nature of issues such as bad debts are the hallmarks of HDFC Bank. This is the reason why HDFC Bank shares have been trading at high premiums for years.
Investors should view HDFC Bank’s investment as an asset. It is a blue chip stock that should be kept in the portfolio forever. The last few days have seen the rise of banking stocks in the stock market. Therefore, there is an investment opportunity in HDFC Bank.
