HDFC Bank Q4 net profit increases 30.1% to Rs 1,889.8 cr

Higher interest income, better margin, lower provisions drive growth

HDFC Bank, India’s second largest private sector lender, on Tuesday said its profit after tax for the quarter ended March 31 increased by 30.1 per cent from a year ago to Rs 1,889.8 crore, driven by higher interest income, better margin, and lower provisions.

It was the 54th consecutive quarter of over 30 per cent year-on-year growth in the bank’s net profit, according to analysts. “This is probably the outcome of our desire to grow a little faster than the industry,” said Paresh Sukthankar, executive director of HDFC Bank, in his post-earnings comments.

For FY13, HDFC Bank’s consolidated net profit expanded by 30.9 per cent to Rs 6,869.6 crore. Net interest income, or the difference between interest income and interest expense, was Rs 4,295.3 crore during the quarter, up 20.6 per cent from a year ago.

The core net interest margin of the bank improved 10 basis points (bps) from a year ago and 20 bps sequentially to 4.5 per cent in the January-March quarter after adjusting for the changes in accounting practices.

Following a Reserve Bank of India directive, HDFC Bank now treats acquisition cost of retail loans as operating expense and recoveries as other income. Earlier, the acquisition cost of retail loans was offset against interest income, while recoveries were treated as write-back in provisions.

The change in accounting practice also means that the bank now expects its net interest margin to stay in the range of 4.1-4.5 per cent. For the past several quarters, the bank’s net interest margin has remained in the range of 3.9-4.2 per cent.

Other income growth was muted and it expanded by 10.7 per cent year-on-year, while operating expenses increased by 17.7 per cent from a year ago. The cost-to-income ratio was 51.4 per cent for the quarter.

Stable asset quality allowed the bank to cut its provisioning to Rs 300.5 crore in the January-March period from Rs 411.6 crore a year earlier. The gross non-performing asset ratio improved by five bps to 0.97 per cent, while the net bad loan ratio remained unchanged at 0.2 per cent.

Total restructured loans were 0.2 per cent of gross advances. Net advances grew by 22.7 per cent to Rs 239,721 crore, aided by higher demand for retail loans. Total deposits were at Rs 296,247 crore, up 20.1 per cent over the last year.

HDFC Bank improved its share of low-cost current account savings account (Casa) ratio to 47.4 per cent as it strengthened its distribution network further. The bank closed the last financial year with 3,062 branches and 10,743 ATMs.

The private lender’s capital adequacy ratio was 16.8 per cent at the end of March 2013.

HDFC Bank’s shares closed on Tuesday at Rs 685.35 on the National Stock Exchange (NSE), down 1.85 per cent from the previous close.