HDFC Bank Q3 net rises 20% on core interest earnings

India's second largest private lender HDFC Bank today reported 20.2 per cent increase in net profit to Rs 2,794.5 crore for the third quarter ended December 31, driven by a surge in core interest earnings.
It had reported net profit of Rs 2,325.7 crore in the October-December period of last fiscal, 2013-14.
The bank's core net interest income grew 23 per cent to Rs 5,699 crore in the third quarter ended December 2014, while other income was up 18 per cent to Rs 2,534.9 crore. The other income included a 14 per cent uptick on fees and commission, a 23 per cent dip in forex and derivative revenue and a five- fold jump in treasury income.

Due to a fall in money market rates, HDFC Bank was able to save on the cost of funds, which helped the Q3 net interest margin to rise by 0.2 per cent to 4.4 per cent.
On the Reserve Bank being unhappy over lenders not cutting interest rates, HDFC Bank Deputy Managing Director Paresh Sukthankar said at a press conference here that the bank will "re-calibrate" its base rate, or minimum rate of lending, by March.
He said the credit costs or provisioning costs in India are excluded from NIM computation and indicated that the criticism - that banks having high NIM are not passing the rate cut benefits to customers - may be unfounded.

Sukthankar said, on sequential basis, the bank's NIM has narrowed by 0.10 per cent. He added that the lender will keep its NIM in the 4.1-4.5 per cent range. Share of the low-cost current account and savings account (Casa) balances slipped by a percentage point to under 41 as of December.

The bank saw an increase in provisioning at Rs 560 crore, as against Rs 380 crore a year ago, but Sukthankar said the comparative number included a write-back of Rs 180 crore. "If we excluded that gain it is a normal 11-12 per cent increase."
Gross non-performing assets ratio came down to 0.99 per cent in the third quarter as against 1.01 per cent, while the restructured loans were at 0.1 per cent.

Total capital adequacy stood at 15.7 per cent with core tier-I at 11.97 per cent as of December 31. With the Rs 9,766 crore ADR and QIP issues earlier this month, the private lender's core tier-I capital will move up to 13.3 per cent on a "static basis", he said.
Without spelling out the details of the issues, the subscription and the investors, Sukthankar said the bank is satisfied with the capital raising exercise and the money mopped up will suffice for the next few years.
After de-growing for multiple quarters, the bank posted a 1.9 per cent expansion in advances to the commercial vehicle and construction equipment sectors. Sukthankar said it will take up to three quarters more for big ticket borrowing to return.