Lower provisioning and strong operating profit helped the country’s second largest private lender, HDFC

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Bank, post 31.42 per cent rise in net profit at Rs 1,429.7 crore for the October-December quarter compared with Rs 1,087.83 crore clocked in the third quarter previous year.

The bank’s retail business, which now consists of 51 per cent of the total advances, grew strongly with gross advances rising 29.5 per cent at Rs 1,00,347 crore for the quarter. Corporate business grew 15 per cent. “We have consolidated our position in retail products by increasing distribution and keeping pricing competitive,” Paresh Sukthankar, executive director of HDFC Bank, said during a conference call.

Net interest margin (NIM) of the bank remained stable for the quarter ended December 31, 2011 at 4.1 per cent on a sequential basis while net non-performing assets remained unchanged at 0.2 per cent. Net interest income (interest earned less interest expended) for the quarter ended December 31, 2011 grew 12.2 per cent to Rs 3,116 crore, driven by asset growth. “We are fairly confident of maintaining a NIM of 3.9-4.2 per cent for the year,” said Sukthankar.

Provisioning and contingencies for the quarter ended December 31, 2011 were Rs 329.20 crore (against Rs 465.9 crore for the corresponding quarter ended December 31, 2010), comprising primarily of loan loss provision of Rs 289.3 crore due to stable asset quality against Rs 292.9 crore for the corresponding quarter ended December 31, 2010.

The bank’s total income increased by 35.6 per cent at Rs 8,622.60 crore for the quarter ended December 31, 2011 compared Rs 6,357.80 crore for the quarter. Non-interest revenue, including income from fees and commissions for trading foreign exchange and derivatives, rose nearly 26 per cent to Rs 1420 crore for the quarter ended December 31, 2011. The Bank’s total balance sheet size increased to Rs 335,487 crore as of December 31, 2011.

Speaking about credit growth for the bank, Sukthankar said, “We still believe that if the ultimate GDP growth is 7 per cent, than 16 per cent would be the loan growth direction for the system and HDFC Bank would grow 10-20 basis points above the banking system.”

As of December 31, 2011, the Bank’s distribution network was 2,201 branches and 7,110 ATMs in 1,174 cities as against 1,780 branches and 5,121 ATMs in 833 cities as of December 31, 2010 Shares of HDFC Bank closed at Rs 485 up by 4.7 per cent compared to the previous close.

Vaibhav Agrawal, vice president, research banking, Angel Broking, said, “The results are very consistent and in-line with expectations. Both margins and assets have been maintained quarter-on-quarter. Overall good set of number. Since valuations are falling, we hold neutral view on the stock.”