HDFC Bank a consistent performer; expect valuations to hold up: Hemindra Hazari

In a chat with ET Now, market expert Hemindra Hazari, shares his view on the first quarter numbers by HDFC Bank.

ET Now: HDFC Bank’s net profit at Rs 2,700 crore seems to be in line with market estimates. What is your view?

Hemindra Hazari: That is correct. There should be no surprise because HDFC Bank has always managed to meet analysts’ expectations. It appears that the lender once again has met analysts’ expectations on all parameters. The lender has has been known for reporting earnings extremely consistently, even in bad economic times. The Q1 numbers have shown that there is stability in the bank’s earnings stream.

ET Now: The net interest margin (NIM) has come in at 4.3 per cent versus 4.4 per cent on a quarter-on-quarter basis. What do you make of this?

Hemindra Hazari: Although it is just 10-basis point reduction, the reading even a 4.3 per cent is quite handsome. Most banks will be highly envious of such high NIMs. The domestic banking industry normally operates at an average NIM of 3 per cent.

There should have been some slight reduction because banks reduce their base lending rate and also a lot of top corporate have been putting pressure on banks to lower rates, which banks have to meet. But, even then a 4.3 per cent NIM is a very robust NIM indeed.

ET Now: Just want to have a word with you in terms of HDFC Bank valuations. We are seeing most analysts are valuing HDFC Bank on a pay basis because of the strong earnings visibility. Do you think that looking at the current earnings, there is a room for possible revision in terms of the PE multiple?

Hemindra Hazari: I am expecting very poor earnings from banks in the first quarter. Even private sector banks would find it difficult report earnings in line with market expectations. HDFC Bank would be the prime beneficiary of that. I would expect the valuations of HDFC Bank to hold up.