You've got to give HDFC Bank (NYSE: HDB ) , India's second-largest private bank by market capitalization, more than a little credit. The company, one of the country's top mortgage lenders through its relationship with parent HDFC Housing, reported results late last week that added yet another quarter of earnings growth in excess of 30% -- the 19th such quarter in a row and a record that must turn larger rival ICICI Bank (NYSE: IBN ) green with envy.
For the third quarter ended Dec. 31, 2006, HDFC reported total income of roughly $480 million (using a currency translation rate of $1 equals 44.44 rupees), up 45% from last year's period. Net income grew an impressive 32% and came in at $66.6 million, slightly ahead of analyst expectations of $65.7 million.
The company benefited from a combination of strong growth in net interest income (up more than 38%) as well as an increase in fees and commissions (up 26%) associated with businesses such as credit cards. The increase in net interest income (interest earned minus interest paid) was driven by a 32% increase in HDFC's asset base and a slight increase in net interest margins to a bit more than 4% compared with 3.9% in last year's period.
I know, I know ... pretty dry stuff, but I'm not quite done yet. Using other metrics, the company looks equally solid: Net non-performing loans as a percentage of assets stood at 0.04%, lower than even many western banks, and the company had a tier 1 capital ratio (basically required reserves) of 8.4%, well ahead of the Reserve Bank of India's requirement of 4.5%.
Now, it's hard to believe, but HDFC looks like it's well-positioned to continue this torrid growth, primarily because there are many opportunities in this still-developing banking market. Take home mortgages: India's National Real Estate Development council believes that mortgages only account for roughly 2% of India's GDP compared with 54% in the U.S.
Not convinced? How about credit card use? According to Visa International, fiscal 2005 was a record year in India, with spending on credit cards growing 66% to $3.8 billion. To put that number in perspective, American consumers spent more than $1.5 trillion on all credit cards during the same period. I'd like to point out that HDFC reported that the number of credit cards it had issued reached 2.75 million for the quarter, up 37% from last year's period.
All in all, these results and the positive outlook for the company's core markets just reaffirm my belief that HDFC will continue to reward its shareholders.
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Fool contributor Will Frankenhoff is enjoying his time writing for The Fool more than reading the Financial Times or taking a nap. He welcomes your feedback. He does not own shares in any of the companies mentioned above. The Fool has a disclosure policy.
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