HDFC Bank's net profit rises 16% in June quarter; misses Street estimates

The bank's NII rose 8.57 per cent in Q1FY21 to Rs 17,009 crore, driven by growth in advances at 14.4 per cent and a net interest margin of 4.1 per cent

The country’s largest private-sector lender HDFC Bank on Saturday reported a 16.1 per cent jump in net profit to Rs 7,729.6 crore in the quarter ending June, lower than Street estimates as the bank’s asset quality deteriorated and provisions increased. In the same period last year, the bank's net profit stood at Rs 6,658.6 crore.

Bloomberg analysts had estimated a net profit of Rs 7,931 crore and Net Interest Income (NII) of Rs 17,634 crore for the first quarter. 

The NII of the lender rose 8.57 per cent in Q1FY21 to Rs 17,009  crore, driven by growth in advances at 14.4 per cent and a net interest margin of 4.1 per cent. In the same period, the other income of the lender was up 54.3 per cent at Rs 6,228.5 crore. The bank’s net revenue in the June quarter was up 18 per cent at Rs 23,297.5 crore as compared to Rs 19,740.7 crore in the same period last year.

The lender’s provisions and contingencies in the June quarter rose 24 per cent over the same period last year to Rs 4,830.8 crore, which includes loan loss provisions of Rs 4,219.7 crore and Rs 611 crore of other provisions. Total provisions for the current quarter included contingent provisions of approximately Rs 600 crore. In the preceding quarter, provisions and contingencies made by the lender were to the tune of Rs 4,693.7 crore.

“The “second wave” of Coronavirus (Covid-19) disrupted business activities for close to two-thirds of the quarter, leading to a decrease in the efficiency in collection efforts, and a higher level of provisions. The total credit cost ratio was thus at 1.67 per cent, as compared to 1.64 per cent for the quarter ending March 31, 2021, and 1.54 per cent for the quarter ending June 30, 2020,” the bank said.   

The asset quality of the bank deteriorated slightly as at the end of the June quarter. Gross NPAs of the bank stood at 1.47 per cent as opposed to gross NPAs of 1.32 per cent at the end of the March quarter and 1.36 per cent as of June 30, 2020.  Net NPAs of the bank stood at 0.48 per cent of the advances portfolio.

The bank held floating provisions to the tune of Rs 1,451 crore and contingent provisions of Rs 6,956 crore at the end of the June quarter. Total provisions, which includes specific, floating, contingent, and general provisions were 146 per cent of the gross non-performing loans as on June 30, 2021.

The bank has disclosed that under Reserve Bank of India’s one-time restructuring scheme, it has restrucutred loans to the tune of Rs 7,800 crore, with retail loans worth Rs 5,457 crore forming the bulk of the restructuring, followed by corporate loans worth Rs 1,735 crore. 

While advances of the lender grew by 14.4 per cent to Rs 11.47 trillion at the end of the June quarter, retail domestic advances grew by 9.3 per cent. Deposits of the book lender grew by 13.2 per cent to Rs 113.45 trillion and CASA deposits grew by 28.1 per cent.