Informist, Saturday, Jul 20, 2024

By Richard Fargose

MUMBAI – HDFC Bank's net profit for the quarter ended June fell 2.0% on quarter to 161.74 bln rupees, but improvement in net interest margin and lower provisioning helped the largest private sector bank to beat the market's estimates. According to the average of estimates of 13 brokerage firms, the bank's net profit was seen at 157.52 bln rupees.

The net profit for Apr-Jun rose 35.3% on year, but the figures for the quarter ended June include those of Housing Development Finance Corp Ltd and hence, not comparable with the corresponding period last year.

This is the fourth quarter the merged entity has reported its earnings. Parent Housing Development Finance Corp merged with HDFC Bank with effect from Jul 1, 2023.

The bank's core net interest margin on total assets improved to 3.47% in Apr-Jun from 3.44% a quarter ago, and reported net interest margin based on interest-earning assets rose to 3.66% from 3.63% in Jan-Mar.

HDFC Bank's provisions and contingencies fell 9% on year to 26.02 bln rupees in Apr-Jun. Provisions were down a whopping 80% on quarter as in Jan-Mar the bank had made a floating provision of 109 bln rupees.

Interest earned during Apr-Jun rose 2.2% on quarter and 50.3% on year to 730.33 bln rupees, while interest expended rose 1.9% on quarter to 431.96 bln rupees.

The bank's gross advances rose 52.6% on year but fell 0.8% on quarter to 24.87 trln rupees as of Jun 30. Total retail advances of the largest private sector lender rose to 12.82 trln rupees from 12.63 trln rupees a quarter ago, while corporate and wholesale loans fell 5.3% on quarter to 4.81 trln rupees as on Jun 30.

The bank's deposits were 23.79 trln rupees as on Jun 30, up 24.4% on year but flat on quarter. The current accounts and savings accounts deposits grew 6.2% on year to 8.64 trln rupees as of Jun 30, but saw an on-quarter fall of 5%.

As a result, the bank's current account savings account ratio fell to 36.3% as of Jun 30, compared with 38.2% a quarter ago.

In a post-earnings conference call, Chief Financial Officer Srinivasan Vaidyanathan said Apr-Jun deposit growth was low due to tight liquidity and seasonal factors in first quarter of the financial year.

He said that for the current financial year the deposit growth will be higher than loan growth and the bank is aiming to bring its credit deposit ratio around to its pre-merger level of 80-85%. However, he said there is no timeline to achieve this target, but the bank will continue to reduce its reliance on borrowed and wholesale funds.

He said the credit-deposit ratio is currently 103-104%.

ASSET QUALITY

The bank's asset quality weakened slightly in Apr-Jun mainly due to some deterioration in the agricultural loan portfolio Vaidyanathan said. The gross non-performing assets ratio rose to 1.33% as of Jun 30 from 1.24% a quarter ago. The net bad loan ratio rose to 0.39% from 0.33% as on Mar 31.

The amount of total gross non-performing assets rose 5.9% on quarter to 330.26 bln rupees.

Excluding gross non-performing assets in the agricultural segment, the ratio would be 1.16% against 1.12% a quarter ago, the press release said.

The total credit cost ratio was 0.42% in Apr-Jun, compared to 0.70% a year ago.

As on Jun 30, the bank's distribution network was 8,851 branches and 21,163 ATMs across 4,081 cities. HDFC Bank added 113 new branches in Apr-Jun, Vaidyanathan said.

The bank's total capital adequacy ratio as per Basel-III guidelines was 19.33% as on Jun 30 against the regulatory requirement of 11.7%.

Today, the board of HDFC Bank in-principle approved the listing of subsidiary HDB Financial Services Ltd. The move is in keeping with the Reserve Bank of India's mandatory listing requirement for upper layer non-bank finance companies by September 2025.

The bank held 94.65% stake in HDB Financial Services as on Jun 30. The total loan book of HDB Financial was 956 bln rupees as on Jun 30, up 30.0% from a year earlier.

On Friday, shares of HDFC Bank closed at 1,607.30 rupees on the National Stock Exchange, down 0.46% from Thursday. End

Edited by Ashish Shirke

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