HDFC Bank net profit at Rs 3,455 cr, up 20% in Q2

Net interest margin for the quarter stood at 4.2 per cent

HDFC Bank-country's second largest private sector lender-has reported a 20.4 per cent growth in net profit to Rs Rs 3,455 crore in the July-September quarter , helped by higher net interest income and lower provisions.

This was in line with Bloomberg estimates of Rs 3,456 crore.

Net interest income, the difference between interest earned and interest expended grew by 19.6 per cent year-on-year to Rs 7,994 crore. This was supported by higher loan growth, with 21.7 per cent in retail and 14.3 per cent in wholesale.

Paresh Sukthankar, deputy managing director of HDFC Bank explained that the growth in retail loans was driven by auto and personal loans.

However, unlike the last quarter the bank did witness that the credit card outstanding remained flat on a sequential basis. "We have moderated the issuance of the new cards as we noticed that the number of active users were coming down. Therefore, we want to be a little conscious of the growth in the credit card segment," added Sukthankar.

HDFC Bank is the largest issuer of credit card in the country. In the last quarter the bank had mentioned that they had seen some pressure on asset quality in the unsecured segment.

Asset quality remained stable with the per cent of Gross Non Performing Assets to Gross Advances at 1.02 per cent as compared to 1.04 per cent in the end of quarter ended June. In the same period Net NPA also improved to 0.30 per cent as compared to 0.32 per cent in the previous quarter.

The management said that in the previous quarter they had witnessed some pressure on asset quality in the business banking and the agri segment. In this quarter even though there has not a marginal improvement in bad loans in the two segment.

Provisions and contingencies for the quarter ended September 30 were at Rs 749 crores (consisting of specific loan loss provisions at Rs 640.7 crores and general and other provisions at Rs 108.3 crores) as against Rs 681.3 crores for the corresponding quarter ended September 30, 2015. However, on a sequential basis it was down from Rs 866 crore.

Other income that includes commissions, fess etc has increased by 13.7 per cent at Rs 2,901 crore.

Net interest margin, a key indicator of bank's profitability, for the quarter stood at 4.2 per cent, this was lower by 20 basis points on a sequential basis. Sukthankar explained that this was mainly because the bank had raised some money to repay the outflow of FCNR (B) deposits and they have been put in short term instruments that have very low margin.

The bank's capital adequacy remained stable at 15.4 per cent. However, the bank may look to raise some Tier-2 capital in the coming quarters.