HDFC Bank Q3 net up 30%

Strong growth in retail advances and high fee income aid earnings

HDFC Bank, India’s second-largest private sector lender, on Friday said its net profit for the quarter ended December rose 30 per cent to Rs 1,859 crore, compared to the corresponding period of the previous year.

This was the 53rd consecutive quarter in which the bank saw annual growth of 30 per cent or more in net profit, according to an analyst estimate. Strong growth in retail advances, a stable net interest margin and higher fee income aided the bank’s earnings during the quarter. Net interest income, or the difference between interest income and interest expenditure, rose 22 per cent to Rs 3,799 crore, compared to the year-ago period. Net interest margin stood at 4.1 per cent, the same as in the year-ago period and 10 basis points lower than in the previous quarter.

“The performance reflects continued execution of our strategy of balanced margin and stable asset quality,” said Executive Director Paresh Sukthankar. He added for the coming quarters, the bank’s margin was estimated at 3.9-4.2 per cent. HDFC Bank’s net interest margin has been in this range for about five years.
 

PERFORMANCE SHEET HDFC Bank quarter-ended December (standalone)
	Dec ’12 (Rs crore)	% change (over YoY)
Interest earned	8,707.62	20.89
Other income	1,798.89	26.68
Total income	10,506.51	21.85
Interest expended	4,908.77	20.12
Net interest income	3,798.85	21.91
Net profit	1,859.07	30.04
Source: Capitaline                                       Data compiled by BS Research Bureau

Fee income rose 24.3 per cent year-on-year, helping the bank’s other income rise 26.7 per cent. As of December-end, the core cost-to-income ratio was 47.1 per cent. Provisions narrowed to Rs 307 crore, compared to the year-ago period. Sequentially, however, these rose due to slippages in commercial vehicle and construction equipment loans. The provision coverage ratio was 80 per cent.

The bank’s gross non-performing asset ratio stood at one per cent, a rise of three basis points from a year earlier and a nine-basis point decline sequentially. Net bad loan ratio was unchanged at 0.2 per cent. Retail loans accounted for about 80 per cent of the additions in HDFC Bank’s gross bad loans during the quarter.

Sukthankar, however, clarified the bank’s asset quality was healthy, adding there was no sign of stress in its retail or wholesale loan portfolios.

Total restructured loans accounted for 0.3 per cent of gross advances. Net advances increased 24.3 per cent year-on-year to Rs 2,41,493 crore. While retail loans rose 28 per cent from a year earlier, corporate loans saw a 18.5 per cent rise.

As of December-end, the ratio of retail loans to wholesale segments was 53:47. Total deposits increased 22 per cent from a year earlier to Rs 2,84,119 crore. The share of low-cost current account and savings account deposits to total deposits was 45.4 per cent.

At the end of the quarter, HDFC Bank’s capital adequacy ratio stood at 17 per cent.

“Asset quality showed some spike. Considering the relative percentage of gross and net non-performing assets, the rise is not alarming,” brokerage Emkay Global Financial Services said in a note to clients.

On Friday, the HDFC Bank stock closed at Rs 659 on the BSE, a fall of 1.2 per from its previous close.