HDFC Bk Q2 net up 20%, provisions up on a single 5:25 exposure

HDFC Bank today reported a 20.1 per cent growth in its September quarter net at Rs 4,151 crore on a rise in core income and narrowing expenses, but witnessed a jump in provisions mainly due to a restructured account.
Without giving any details of the account which has been restructured under the 5:25 scheme, and the outstanding, the bank said it is a performing account and it is in dialogue on how to classify it as.
When asked if the account pertains to a list of divergences, as was reported by its smaller rival Axis Bank, its deputy managing director Paresh Sukthankar said it may not be fair to call it as a divergence as the bank continues to be in dialogue with the regulator.

"It is a standard, performing account with no outstanding dues for us. But we have set aside contingency provisions," he said, adding that most of the Rs 397 crore marked as "general provisions" is towards this purpose.
Its overall provisions almost doubled to Rs 1,476 crore from the year ago period's Rs 749 crore.
Axis Bank had said that the Reserve Bank has found that it has under-reported NPAs in nine accounts, which was one of the reasons for a dip in its earnings.

HDFC Bank's core net interest income grew by 22 per cent to Rs 9,752 crore on the back of 22 per cent growth in advances, while the non-interest income was up 24 per cent to Rs 3,605 crore.

Sukthankar said the bank has passed on the benefits of lower rates to borrowers, which has resulted in a 0.10 per cent drop in its net interest margins to 4.3 per cent.
The loan growth was split almost evenly between the retail and wholesale segments, he said, adding that the latter was driven by demand for working capital.
Term loans or project loans demand, which would signify an uptick in the economy, are still multiple quarters away, he said, adding that the bank will participate in the same.
Courtesy a fall in the number employees by nearly 9,000 from its peak of 95,000 achieved in September 2016, the bank's cost to income ratio declined to 42.6 per cent from the 45.9 per cent. It added a net of 2,700 employees during the July-September period.

Attributing the improvement in the ratio to digitisation, Sukthankar said there is further scope for reducing the important ratio over the next few quarters.
The bank's gross non performing assets ratio came at 1.26 per cent as against the year-ago's 1.02 per cent and the 1.24 per cent in the June quarter.
Sukthankar said the stress in agri book, which had led to a spurt in NPAs in the preceding quarter, remains even though there has not been a jump in NPAs due to seasonality.
The bank has two accounts in the revised list of 40 dud accounts to be resolved through the NCLT, Sukthankar said, adding that the total exposure is Rs 200 crore and fully provided for.

The share of the low cost current and saving accounts improved to 42.9 per cent, even as there was some slump in the current account growth.
It purchased Rs 3,136 crore of home loans it originated for parent HDFC as against the Rs 2,458 crore in the preceding quarter and Rs 1,939 crore in the year-ago period. Its home loan growth came at 19 per cent.
The overall capital adequacy was at 15.1 per cent with the core tier-I at 13.3 per cent, and Sukthankar said there are no core capital raising plans for now.
The bank has opened 14 branches in the first half of the fiscal 2017-18 and plans to take it up to 200 by the end of the fiscal, Sukthankar said, admitting that there has been a slowdown in branch expansion due to digital from a peak of up to 400 branches per year some time ago.

Its total number of branches stand at 4,729 as of September 30.
The bank scrip closed at Rs 1,867, up 0.23 per cent on the BSE, as against a 0.31 per cent gains on the benchmark.