HDFC Bank Q4 net rises 18% to Rs 3,990 cr

Still higher than estimates; provisioning for loan losses up, assets healthy

HDFC Bank, the country's second-largest in the private sector in terms of assets, reported an 18.3 per cent rise in both its fourth quarter as well as yearly net profit.

This was so even as provisioning increased, mainly on the asset classification leeway given in the third quarter by the Reserve Bank of India (RBI) and due to aggressive expansion of the loan book in the fourth quarter.

Profit for the financial year's fourth quarter ended March was Rs 3,990 crore; for all of 2016-17, it was 14,549.7 crore. This is the second quarter in a row that the bank reported quarterly profit growth below 20 per cent; it is also the first time in its history that yearly profit growth has dipped below 20 per cent.

Analysts were expecting quarterly net profit of Rs 3,956 crore. The bank’s shares rose 2.4 per cent to close at Rs 1,496.75 a share, having hit a lifetime high of Rs 1,499 in the trading session. Provisions and contingencies for the fourth quarter were Rs 1,261.8 crore, as against Rs 662.5 crore in the year-ago quarter. In the December quarter, the provisioning was Rs 715.78 crore. Those for the March quarter comprised Rs 977.9 crore in specific loan loss provisions, Rs 280.3 crore in general provisions and others of Rs 3.6 crore. 

The specific loan loss provisions for the quarter included those accounts that would have turned non-performing (NPA) during the quarter ended December 2016 but were classified as NPA only in the latest quarter. RBI, the country’s central bank, had given a special dispensation to banks, for loans up to Rs 1 crore, to extend their NPA classification by a further 60 days, from the standard 90 days, considering the uncertainties caused by the demonetisation drive.  In a call with media to discuss the results, Paresh Sukthankar, deputy managing director, said the ‘provisions spillover’ in the March quarter from the December one was about Rs 100 crore. In the year-ago quarter, specific loan loss provision was Rs 490.3 crore, general provision Rs 161.1 crore and others were Rs 11.1 crore. The incremental rise in provisioning over the December quarter due to purely bad debt accretion was Rs 70-80 crore. These arose out of small-ticket loans such as micro lending and from agriculture, typically cash-dependent sectors that could be still recovering from a shortage of cash after demonetisation, Sukthankar said. The domestic loan portfolio grew 23.7 per cent year on year, outpacing the system growth of below five per cent. Deposits grew 17.8 per cent, above the sector average. The domestic loan mix between retail (individual) and wholesale (corporate) loans was 53:47. The loan growth helped a healthy net interest income growth of 21.5 per cent.

However, the corporate loan book grew largely due to working capital loans. “On the wholesale side, a very substantial increase is due to working capital and short-term loans. We haven’t seen capex-related growth of late and remain bullish on trade finance and short-term loans,” Sukthankar said, adding they were “extremely well positioned in the retail and wholesale segments”. 

For the bank’s customers, he said, the situation had largely become normal after demonetisation. Current and savings account deposits consisted of 48 per cent of total deposits, against 43-44 per cent in March 2016. Sukthankar said he did not wish to guess of how much of the bank’s deposits, garnered after demonetisation, would remain sticky with it.

 

Gross NPA in absolute terms rose to Rs 5,886 crore from Rs 5,232 crore in the December quarter and Rs 4,393 crore in the year-ago March quarter. However, in percentage terms against total advances, the gross NPA ratio remained stable at 1.05 per cent from the December quarter and slightly up from its year-ago quarter’s 0.94 per cent. 

“Asset quality remains very healthy and we remain very comfortable with that,” said Sukthankar.

The net interest margin increased to 4.3 per cent, from 4.1 per cent earlier. 

The recent RBI directive to increase provisioning on telecom loans would have “no meaningful impact”, as their exposure to the sector was less than four per cent of the loan book, he said.  

Sukthankar also ruled out tweaking of lending rates. “Right now, we are comfortable with the rates. Our base rate and MCLR (marginal cost of funds-based lending rate) are among the lowest in the industry and we have the highest transmission (of monetary policy) in rates in the industry,” he said in the call.