HDFC Bank net up 20%, but NPAs spoil the show

Specific loan loss provision up almost 70% to Rs 1,079 crore, NPAs rise substantially

Private lender HDFC Bank saw a 20 per cent rise in net profit for the September quarter on the back of revenue growth and a reduction in the cost-to-income ratio.

However, it saw the provisions and contingencies growing twofold over the year-ago quarter. Net profit grew to Rs 4,151 crore for the quarter ended September 2017, against Rs 3,455 crore for the same quarter in the previous year.

The provisions and contingencies, including those for stressed loans, were Rs 1,476.2 crore, against Rs 749 crore in the year-ago quarter. The specific loan loss provisions and general and other provisions were Rs 1,078.8 crore and Rs 397.4 crore for the quarter, against Rs 640.7 crore and Rs 108.3 crore, respectively, in the previous year’s corresponding quarter.

The bank has specified a restructured project loan, in which it holds a 2.3 per cent share, for which the Reserve Bank of India has made ‘certain observations’. “We are still in the process of dialogue with the regulator and are yet to reach finality. 

We have made adequate contingent provisions to account for any potential impact,” said Deputy Managing Director Paresh Sukthankar. He said that most of the general provisions for the quarter pertained to this account, but maintained that it was a standard account for them.

Asset quality slipped as the gross non-performing assets (NPAs) ratio and net NPA ratio stood at 1.26 per cent and 0.43 per cent, respectively, as of September 2017, against 1.02 per cent and 0.3 per cent, respectively, as of September 2016. The June quarter gross and net NPA figures were 1.24 per cent and 0.44 per cent, respectively. The bank said that the NPA ratios were flat on a sequential basis following the previous quarter peak due to agricultural loans.

Net interest income for the quarter rose by 22 per cent to Rs 9,752 crore, from Rs 7,993 crore in the corresponding period of the previous year. 

Other income, which includes fees and commissions, rose by 24.3 per cent to Rs 3,605 crore. The net interest margin stood at 4.3 per cent, against 4.4 in the previous quarter and 4.2 per cent in a year-ago quarter.