HDFC Bank Q2 Net up 20 pc on higher core int income, margins

HDFC Bank today reported a 20 per cent rise in net profit, its slowest growth in the past five quarters, at Rs 2,381.5 crore for second quarter ended September 30, notwithstanding a healthy jump in core interest income and margins.
This is also the fifth consecutive quarter when the country's second largest private sector bank has posted a sub-30 per cent increase in quarterly profits.
For 37 straight quarters, the bank posted at least 30 per cent profit growth.
The bank had earned Rs 1,982.32 crore net profit in July- September quarter of the last fiscal.
The city-headquartered bank's net interest income grew 23.1 per cent to Rs 5,511 crore during the reporting quarter, while other income grew at tepid 11 per cent at Rs 2,047 crore restricted by a halving of its forex and derivative revenue at Rs 221.7 crore.

When asked if a profit growth in the 20s is the new normal, bank's Deputy Managing Director Paresh Sukthankar said the bank does not give any guidance and said generally the profit growth is a function of GDP growth. Maintaining sound asset quality and margins is also a key for the bank, he added.

Deposits grew 24.8 per cent, while overall advances grew 21.8 per cent, while total income rose to Rs 13,894.7 crore from Rs 11,937.7 crore.
However, the bank exceeded its own forecast on the key net interest margin, which expanded to 4.5 per cent as against the general guidance of 3.9-4.2 per cent.

Sukthankar attributed the expansion in margins to base effect, an increase in the low-cost Casa deposit base at 43.2 per cent and higher growth in high interest earning retail loans.
On the future trajectory of margins, he said the bank will maintain it in the 4-4.4 per cent range.
Asked about the lending rates, especially in the wake of the bank exceeding its guidance on margins and rival Axis Bank cutting its base rate by 10 bps last week, Sukthankar said HDFC Bank has not taken a call yet and is comfortably placed on liquidity.
He further said the base rate is a function of the deposit rates, which are in turn guided by the liquidity position.

The second largest private sector lender's retail advances grew 17 per cent (disbursements were up 21.8 per cent), while wholesale advances jumped 22 percent, Sukthankar said.
He said a GDP growth of over 5.5 per cent will result in the system's credit growth, which has barely breached the double digit mark this fiscal, growing to 12-13 per cent and the bank shall outpace the system by 4-5 per cent.
Demand from corporates for greenfield projects is yet to come in and Sukthankar said the same is a few quarters away, adding its corporate book growth came in form of working capital loans and some medium term loans.