HDFC Bank's fiscal 2015 first-quarter stand-alone earnings grew 21%, broadly in line with our annual five-year growth estimate of 20%. There were no surprises on all key earnings drivers, provision/loans ratio, interest margins, noninterest income, and operating costs, each of which is a critical factor for our fair value estimate. With no surprises during the quarter, we retain our narrow moat rating and INR 1,050 fair value estimate.
Provisions to average loans continue to remain below 1%, which is an average seen across the majority of Indian private lenders under our coverage, closing the quarter at 0.8% and in line with our 2016 forecast. The specific provisions, however, remained similar to last quarter, this time on account of agricultural-related business loans. Management anticipates this to reverse during the year, and given the cyclical nature of the sector, this does not cause us great concern. The bank's floating provisions acted as a buffer despite the higher specific provisions this quarter, and we are happy to hear that the bank will continue creating floating provisions going forward.
Net interest margins were down a modest 10 basis points to 4.3% as yields have fallen modestly in a competitive environment. Competition from alternate sources of short-term corporate loans caused these loans to grow just 13%. Retail loans continued to be the bright spot, growing 26%, led by the personal loans category.
Noninterest income was a healthy 28% of net revenue, with fees and commissions (including transaction fees and third-party products) growing 21% over the prior year. The cost/income ratio also remained flat with the prior year at 45.2%, in line with our 45.3% forecast for 2016. We maintain our positive outlook on this exemplary-stewardship company.
The consistent trend on cost/income was achieved despite 50% of the incremental 631 branches opening during the year in urban and metro cities, which tend to be higher cost in terms of rent, square footage, and staffing requirements. While HDFC is making a huge foray into digital banking by making many of its offerings available across online mobile platforms, its branches continue to play an important role in customer acquisition and servicing.
As per Reserve Bank of India data as of April 2015, the bank leads in terms of 30% value share of mobile transactions done in India; however, it has only 9% share in terms of volume. Mobile is becoming an important alternate channel in a country where 70% of the population has a mobile phone, but only 35% has a bank account.
